Ethical and impact investing apps like Clim8 (closing) & Tulipshare (pivoting) have found it difficult to gain traction and onboard enough customers to grow as sustainable businesses, but one platform that is bucking the trend and moving into ETFs is CIRCA5000. CIRCA5000 are launching their own range of IMPACT ETFs, which enable investors to buy into a diverse range of companies that are not just ethical but are actively doing something to make the world a better place.
It’s a smart move as it means that CIRCA5000 can generate revenue from anyone with a full-service investment account like Interactive Investor, AJ Bell, or Hargreaves Lansdown who want to make more ethical investments, rather than those who invest directly through their app. This is good news, because if ethical investment platforms can’t make money, they cannot survive, and if there are no impact investing specialists around, then it’s harder for people to make more meaningful investment decisions.
CIRCA5000, believe that “the world’s biggest challenges are also the biggest return opportunities“. Charlie Macpherson, the CIRCA5000, Managing Director of ETFs tells us why they are launching ETFs and how they can help people “unleash the power of money for good“.
You’ve just announced that you’ll be launching some impact-based ETFs. How long has this been in the works?
Launching our own range of ETFs has been on the company roadmap since CIRCA5000 launched in 2018. It’s been central to our founding mission because we understood that we needed full oversight of the impact of the underlying companies in the funds we offered. Our new funds mean that we have the opportunity to vote or speak directly with senior company stakeholders if companies are falling short of their commitment to making a positive impact. For the past 18 months, we have been focused on launching the funds, which involved finding the right partner [impak Analytics & BITA] to help us develop the indices, which proved challenging due to the high standards we were aiming for.
- Related Interview: Tom McGillycuddy, CEO of tickr (now CIRCA5000) on how impact investing can help you make a difference (as well as money)
What will the ETFs consist of and how do you monitor the investments?
There will be 5 ETFs, each covering a different impact theme:
- CIRCA5000 Clean Water & Waste UCITS ETF (C5KW)
- CIRCA5000 Green Energy & Technology UCITS ETF (C5KG)
- CIRCA5000 Social & Economic Empowerment UCITS ETF (C5KE)
- CIRCA5000 Health & Wellbeing UCITS ETF (C5KH)
- CIRCA5000 Sustainable Food & Biodiversity UCITS ETF (C5KF)
Each ETF will invest in a portfolio of high-impact global equities aligned with a theme. The initial screen of companies is provided by Bita (an index technology company) before impak Analytics (an independent impact rating agency) performs a thorough impact assessment based on the Impact Management Project’s 5 dimensions of impact to determine eligibility for the final indices.
Companies are monitored on an ongoing basis for significant events that would affect their impact ratings such as controversies or Mergers & Aquisitions (M&A) activity. In the absence of any significant events, the analysis is updated annually in line with company reporting.
Do you think that ETFs are the future of impact/ethical investing rather than stand-alone apps?
Apps will remain an important part of the investment ecosystem to ensure retail customers have the best investment experience. The launch of our ETFs will enable us to distribute to a much wider audience than the retail base we have targeted to date, something that differentiates us from platforms like Clim8 and Tulipshare and gives us a more diverse business model.
At the same time, we will have the benefit of our direct-to-consumer platform to differentiate us from many of the larger ETF issuers. As the fund issuer (as opposed to selling third-party externally managed funds) we will be able to offer retail customers an enhanced and more engaged investment experience.
What platforms will people be able to invest in these ETFs?
The ETFs will be listed on the London Stock Exchange and so available to a large range of investors, both retail and institutional. We are working to ensure they feature on all of the main retail and advisor platforms, as well as the CIRCA5000 investment platform.
How much will you charge customers who hold the ETFs?
The ETFs will have a TER of 0.49% which is in line with thematic ETFs and include additional features such as pass-through voting (institutional only to begin with) and transparency of impact analysis on every company and impact reporting.
Can you tell us a little bit about your existing client base who have invested through the app? Customer numbers, average investment, funds on accounts etc.
161,000 people signed up to use the app. We have more than 15k active regular investors. Our average deposit has increased by 4x in the last 12 months, and our pension transfers are at 500% growth over the last 12 months as well.
Are there plans to introduce more ETFs in the future?
Yes, we have built an investment platform that is scalable and able to host many more ETFs. A few ideas are in the pipeline but it will also be important to execute the launch of our first five funds properly first.
What do you think is the most important thing about ETF investing?
ETFs are a low-cost, liquid and efficient way of investing in a diverse range of equities or bonds. The criticism sometimes aimed at ETFs is that they are too passive in their approach. We have built our ETFs to tackle this; the index is active in its selection methodology and we will take active ownership through voting and engagement. The ETFs are therefore only passive in their approach to replicating the indices, but active in our ownership.
Charlie Macpherson, is Managing Director of ETFs at CIRCA5000