[ Question ]

Should we create an EA index?

by Peter Sølling1 min read4th Aug 20207 comments

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InvestingSocially responsible investing
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Apart from managing donations, how would it look if the CEA defined an EA500 index - similar to the 'fortune500-index' or the 'S&P500-index' upon which a non-profit index fund could be established to funnel investments to companies with a relatively high positive impact on the EA focus areas? In this way, return on investment could be reinvested into these same EA500-comanies or donated to the CEA. Where can I learn more about previous discussions on this question?

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A good starting point for reading on this would be this post by HaukeHillbrandt and this response by grissman.

There's also this talk by John Halstead, who co-authored the paper with Hillebrandt.

Thank you so much for you fast reply, Alex! Very helpful!

Thanks Michael! Amazing resources, and thanks for sharing them so quickly! Have a good day! Peter

I doubt that the positive impacts of investing in publicly traded companies would be measurable or significant, and it would generally cost us returns, and that loss could be better spent. Besides alexrjl's links, here's a good video on responsible/sustainable investing. It's worth taking a look at some of the comments, too.

However, there can still be benefits to having an EA index (or ETF): it could bring attention to issues, e.g. plant-based meat, AI, etc.., and EAs may have different risk-aversions, credences in extreme events, discount rates and time horizons from the overall market (although these probably differ by cause area). There are also other tweaks that can be made to a standard market-cap weighted index to improve risk-adjusted returns, e.g. towards the other factors in this model, like value, but there are also already indices and ETFs for these factors (although usually not handling all of them together at the same time, it's up to you to combine them).

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Perhaps just randomly: the Trade for Sustainable Development scoring of the International Trade Centre includes a list of companies implementing 14 certifiable voluntary sustainability standards. According to some trade experts, the cost of certification is often the bigger hindrance the smaller the company is. Also, the profits of a sustainable enterprise may go to the middle-income managers as opposed to the low-skilled workers (one research).

Also, Resonance works on impact investing. I do not believe that they focus on reporting/scoring but could be a valuable resource to inquire about the landscape and perhaps criteria.

Do you know of the T100 project of the Toniic impact investing community and the IRIS+ metrics of the GIIN impact investing network?

Should social return on investment (increase in everyone's profits/investment) be considered (One Acre Fund, Babban Gona, ImpactMatters top list)? Should the idea that the value of life may be ~proportional to the GDP/capita of an area be considered?