Philippe Cousteau Launches Sustainable ETF

Jacques Cousteau's grandson sees for-profit mechanisms supporting non-profit causes

Building donations into the cost of a product to support not-for-profit causes isn't new; many social enterprises use the technique to advance important social agendas (Lauren Bush's FEED Projects is one of many examples). But building a donation into the fee of an ETF fund? That's a innovation that is now credited to Philippe Cousteau, the grandson of the late oceanographer Jacques Cousteau and the co-founder of the AdvisorShares Global Echo ETF (NYSE: GIVE), an actively managed ETF supporting sustainability that was launched on May 23. Philippe Cousteau is also the CEO of EarthEcho International, a non-profit 501c3 organization co-founded with his sister Alexandra in honor of their father Philippe Cousteau Sr. whose mission is to empower youth to take action to protect the Earth's waters.

SUSTAINABLE ETFs: CROWDED WATERS?

There are other ETF funds that use sustainable strategies to be a force of good. In 2010, for example, the New Hampshire-based investment manager Pax World launched ESG Shares (NASI, ETFY and EAPS), a group of ETFs focused on sustainable investing and named after the acronym that describes the three primary factors used to measure the sustainability and ethical impact of investment: environmental, social and governance.{1} iShares' KLD Select Social Index Fund (KLD), founded in 2005, and KLD 400 Social Index Fund (DSI), founded in 2006, target companies that have demonstrated positive ESG characteristics, and together have amassed over $336 million in managed assets.{2}{3} 

SUSTAINABLE FISHING: FUNDING A 501c3 WITH AN ETF

Yes, Cousteau may be entering a competitive field, but while GIVE—which has multiple portfolio managers and quarterly dividends—is similar to these older funds in that they focus on companies with good sustainability strategies, it brings to the table a simple, but new idea: a built-in donation. Essentially, 40 basis points of the fund's 1.7% annual operating expense goes to the Global Echo Foundation, a 501c3 charitable foundation founded by Cousteau that invests in women and children's rights, energy efficiency, technology, renewable energy and, of course, ocean conservation.{4} "This idea started three years ago when I was trying to think about how we could innovate financial markets," said Cousteau in an interview with Fox Business' Cheryl Casone. "This is an opportunity to say, 'How can we have market interaction and relationships and collaboration with the non-profit world and have everybody win?'{5} 

POTENTIAL CONFLICTS AHEAD…

"The idea of a charitable ETF raises all kinds of interesting questions," writes Brendan Conway, Barron's funds blogger and columnist. "Namely: What if the fund owned BP plc (BP) before the Gulf oil crisis hit? Would it be forced to sell at a time in the midst of a crisis like BP’s? Skittish investors got crushed in the summer of 2010 and others moved into the stock profitably. That’s just one example where there’s potentially a conflict between the sustainable-investment mandate and delivering returns to shareholders."{6} In an interview with Barron's, Cousteau didn't rule out investing in a company like BP, saying, "Without having {the subadvisors} in the room, I can't speak for them, it's impossible to say. {But} the goal is to be open minded, to look at strong-performing companies. The idea is not to write anything off, but to be level headed if possible in our approach and be sure that we have a successful fund. Nothing is off the table necessarily right off the bat, everything deserves a balanced analysis."{7} 

…BUT POSITIVE OPENING DAY

Perhaps Conway's BP scenario will be a bridge that Cousteau will have to cross one day. But in its early days on the NYSE, GIVE is offering socially-responsible investors and impact investors with another option. GIVE ended its first day of trading at $50.02 a share, up 0.02 points at a volume of 3,580. As Cousteau happily noted in his Fox interview, his ETF was up on a day the market was down. "It's a good investment," he told Casone. "You can have your cake and eat it too. You can make a positive difference on your balance sheet and make a positive difference in the world at the same time. It's a win-win."{8} Jacques Cousteau once said, "If we go on the way we have, the fault is our greed and if we are not willing to change, we will disappear from the face of the globe." With GIVE, his grandson is giving us a tool to help make that change.

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NOTES

{1} Eric Dutram. Pax World Launches ETFs Focused On Sustainable Investing. ETFdb. May 19, 2010. Accessed May 31, 2012.

{2} iShares. MSCI USA ESG Select Social Index Fund. May 30, 2012. Accessed June 1, 2012.

{3} iShares. MSCI KLD 400 Social Index Fund. May 30, 2012. Accessed June 1, 2012.

{4} GIVE Global ETF. Overview. Accessed June 1, 2012.

{5} Philippe Cousteau. Interview by Cheryl Casone. Fox Business. May 24, 2012. Accessed June 1, 2012.

{6} Brendan Conway. Cousteau's Sustainable-Investment ETF Launches. May 24, 2012. Accessed June 1, 2012.

{7} Brendan Conway. Philippe Cousteau Takes Philanthropy To ETFs. February 16, 2012. Accessed June 1, 2012.

{8} Ibid., 5. Download a GIVE Fact Sheet

image: Map of the world's oceans in French (credit: Avsa, translated by Sting, Wikimedia Commons)