Impact Shares, a non-profit fund manager, is launching an Exchange-Trade Fund (ETF), which will track the performance of the Morningstar Societal Development Index. This index was constructed to include social criteria identified by and important to the United Nations Capital Development Fund (UNCDF). This ETF offers investors a liquid investment vehicle that supports companies generating an economic benefit in the world's 47 poorest countries, known as the Least Developed Countries (LDCs). Impact Shares intends to make charitable contributions to UNCDF equal to the Fund’s Net Profits. Net Profits is the excess, if any, of Impact Shares’ Fund fees after the deduction of operating expenses and a reserve for working capital.
The creation of this ETF reflects the importance of the LDC markets and our efforts to increase private sector investments in emerging local economies. It will give investors a vehicle to reward companies that are investing responsibly to help achieve the Sustainable Development goals (SDGs) in LDCs, lower-income, and lower middle-income countries.
It has been estimated that achieving the SDGs will require between US$5 to $7 trillion, with an investment gap in developing countries of about $2.5 trillion. Efforts by governments and philanthropy alone will not be enough. According to OECD estimates, only 7% of the total private capital mobilized through blended transactions from 2012-2015 went to LDCs ($5.5 billion out of $81 billion mobilized in all developing countries). UNCDF's mandate is to unlock public and private capital in the 47 LDCs. We work to identify pioneering projects with development impact and use our grant funding and technical assistance to leverage the additional sources of finance needed to get the deals done. Our aim is to demonstrate that underserved markets can offer viable investment opportunities for the private sector.
The SDGs have opened the door for the UN to partner with private actors in new ways. This movement has helped private sector actors develop innovative new mechanisms—beyond corporate social responsibility and philanthropy—to align their long-term investments with the SDGs. This ETF is one of those innovations that aims to align investor choices with the SDGs.