Racial equity ETF ‘utilizes the NAACP’s 100-plus year history’ of corporate advocacy: Expert

Impact Shares Chief Engagement Officer Marvin Owens joins Yahoo Finance Live to talk about the NAACP Minority Empowerment ETF.

Video transcript

- Impact Shares NAACP minority empowerment ETF is on a mission to provide exposure to companies with strong racial and ethnic diversity policies in place. And investors are buying in. The fund is seeing gains of more than 8% since the start of the year. Joining us now is Marvin Owens, Impact Share's chief engagement officer in this week's ETF report brought to you by Invesco QQQ. Nice to see you, sir. Tell us about this fund and what separates it from others.

MARVIN OWENS: Great to be here. Thanks for having me. It's an interesting fund in the sense that we are unique in the market in that Impact Shares is a 501(c)(3) nonprofit. And so we work with leading environmental and social advocacy groups to basically take their missions and translate them into investable products. The first fund that we built and created in partnership with the NAACP is NACP. And what we did was we utilized the NAACP's 100-plus year history of advocating for corporate policies around racial equity and diversity and inclusion. And we used that strategy as a way of applying it to publicly traded companies on the Russell 1000.

What you have in this index our companies have been scored and ranked using criteria provided by the NAACP. So investors who are looking for companies that are committed to good policies around racial justice or racial equity can look at NACP as an opportunity to kind of see who those companies are. We are also set up in a way that we would provide the net advisory fees back to the NAACP to support their ongoing corporate engagement work. So it's a really unique product in the market. There's nothing much like it any other place.

- Marvin, I'm looking at your top holdings here. Apple, Microsoft, Amazon, Nvidia, Tesla all dominating those top holdings. I know you were mentioning that criteria that you guys go through in order to identify these holdings. But what is that common thread other than the fact that all those companies are tech companies that you're seeing as to why they are the top holdings in this fund?

MARVIN OWENS: Well, it's interesting because those tech companies are also a pretty significant part of the US market, quite frankly. But I also know that those companies are of the size that they have really interesting and really committed internal policies around racial equity. And so I think the real issue here is not that the companies in our index are perfect. It really means that these companies have scored well relative to their counterparts.

The companies in the fund are not companies that have gotten it right or gotten it perfect. But they are companies that have scored well. The key here is the engagement aspect of the fund. We are a 501(c)(3) that's actively engaged with the companies in addition to the NAACP being actively engaged with many of these companies to advocate for the kind of policies that represent racial equity.

- There has been loads of research, frankly, showing big tech's lack of diversity, its racial wealth gap, its racial worker gap. Is that a false narrative?

MARVIN OWENS: No, it's not. But it also means that these companies have scored well relative to their counterparts. Again, these companies aren't perfect. And there's lots of work to be done. And the goal here is not to just have an index fund with a bunch of companies in it. But there has to be active engagement in order to improve those scores. Good example-- when we launched three years ago, a company like American Airlines didn't make it into the index because their score was just not good enough. They did not score well.

And so over the years, there's been active engagement with a company like American Airlines led by the NAACP. And after that engagement took place over a couple of years, we did our rebalance last year. And American Airlines made it in. The engagement is really what makes the difference. These companies aren't perfect by any means. But they are striving toward and committed to the kinds of policies that represent racial equity.

- And Marvin, you also have another ETF, a mortgage-backed securities ETF. OWNS. O-W-N-S. What can you tell us about that and why you launched this fund?

MARVIN OWENS: Yeah. As an advocate for more than 20 years working in the economic empowerment space, the question of what do we do to close the homeownership gap and what are we do to close the racial wealth gap was always a key issue. And so homeownership is a key strategy to closing the racial wealth gap. And OWNS is set up as a mortgage-backed securities ETF, agency-backed securities. We're talking about Fannie, Freddie, agency-backed securities.

We are we're buying mortgages that are in persistent poverty communities so that these are communities that are of high minority presence as well as communities that have historically been the recipients of redlining. And so we are actively engaged in driving investment back into those communities. So we're focusing in on communities of color and building this ETF around that strategy. What we've been able to do is really been able to sort of focus in on the fact that there is nothing like this in the market as well. There's nothing like a mortgage-backed securities ETF that's really focused on Black homeownership.

What we've been able to watch because of our partnership with a company like Redfin, we've been able to see a $27,000 increase in value in the homes that we're buying these mortgages-- where we're buying these mortgages, which means that these Black families are seeing an increase in their net worth. We're very interested in making sure that we're not just creating another ETF product that is similar to what's already in the market. But we really want to see active, focused impact on communities of color. And we're beginning to see that with the OWNS product.

- All right. Affordable housing ETF, ticker OWNS, O-W-N-S. Marvin Owens, thanks so much.