It’s often said that it’s better to give than receive, but a growing crop of exchange-traded funds offers investors the ability to give to charity and potentially profit at the same time.
“These are often impact investing funds, aiming to make a positive difference, for example, by investing in companies supporting minority empowerment and representation,” says Daniel Straus, director of ETF research and strategy at National Bank of Canada Financial Markets. “These ETFs put an additional spin on the idea by seeking to donate a portion of proceeds to related charitable causes.”
ETFs that donate directly to charities represent a sliver of the total fund universe, with most listed in the U.S., but there are some in the Canadian market for investors seeking sustainable strategies.
CIBC Asset Management’s Sustainable ETF series, launched in 2021, includes the Sustainable Canadian Equity (CSCE-NE) with a 0.73 per cent management expense ratio (MER), the Sustainable Core Plus Bond (CSCP-NE) with a 0.51 per cent MER, and the Sustainable Global Equity (CSGE-NE) with a 0.9 per cent MER.
“Our approach was to help align investors’ values with their investments in an environmental, social and governance [ESG] mandate,” says Aaron White, vice-president of sustainable investments at CIBC Asset Management Inc.
That also included a decision to donate five per cent of the MER to a climate-related charity.
Last year, for example, CIBC chose Alberta-based Pembina Institute, a non-profit focused on providing advice on the climate transition. Mr. White says the charity received a $12,000 donation from CIBC in February.
“And it’s something we will look to expand to more organizations on an annualized basis as assets grow,” he says.
There are a handful of choices in the U.S., including the IQ ETF impact series from New York Life Investments.
Among them is the IQ Healthy Hearts ETF (HART-A) with a 0.45 per cent MER, which invests in companies treating cardiovascular disease while donating a portion of its MER to the American Heart Association Social Impact Fund.
IQ has three other impact funds supporting charities, including the IQ Cleaner Transport ETF (CLNR-A) with a 0.45 per cent MER. It provides exposure to companies involved in sustainable transportation while supporting the National Wildlife Federation, which helps to preserve natural ecosystems. Of note, New York Life does not specify in its online materials what percentage of assets it donates to support these causes.
Simplify’s Health Care ETF (PINK-A), which aims to invest in companies developing ground-breaking research and has an MER of 0.5 per cent, takes a different tact, notes Mr. Straus.
The company describes itself as the “first 100 per cent pro bono” ETF, where all net profits are donated to the Susan G. Komen Foundation supporting breast cancer research.
Impact Shares, a charitable, non-profit organization, also aims to donate all its net profits from its ETFs. These include the YWCA Women’s Empowerment ETF (WOMN-A), aiming to support the YWCA, and the Sustainable Development Goals Global Equity ETF (SDGA-A), seeking to support United Nations’ sustainable development projects. Both have an MER of 0.75 per cent. Impact Shares notes on its website that it has yet to garner enough assets to turn a net profit from fees to support these causes.
Loncar Cancer Immunotherapy ETF (CNCR-Q), launched in 2015, also donates a portion of its AUM while investing in companies developing new cancer drugs. The ETF has an MER of 0.79 per cent.
“The key reason for the fund is to invest in this increasingly important area, with the donation really an after-thought,” says Brad Loncar, chief executive officer of Kansas-based Loncar Investments.
Its portfolio includes German pharmaceutical giant Merck (MRK-N), maker of pembrolizumab, considered the largest immunotherapy drug in the world, and newer firms like Legend Biotech Corp. ADR (LEGN-Q), developing a therapy using multiple myeloma patients’ T-cells to attack malignant cells. The fund donates two basis points of assets annually to the New York-based Cancer Research Institute, Mr. Loncar says.
He adds that the fund’s charitable component is not a “marketing tool” but “just the right thing to do.”
Mr. White of CIBC says charitable initiatives aren’t a key driver for investors in his company’s ETF.
“Most coming to us are focused more on how we build a portfolio with sustainable outcomes,” he says. “But the donation is really the cherry on top.”
Mr. Straus of National Bank says many investors prefer to purchase ETFs with lower fees and potentially better performance and donate on their own to preferred charities.