Impact Shares

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Funds Group: Impact Shares

Management Company: Impact Shares, Corp.

Affected Funds: (1) Impact Shares NAACP Minority Empowerment ETF and, (2)  Impact Shares YWCA Women’s Empowerment ETF

Principal Sustainable Investment Strategy: Ethical/Religious; Thematic

Summary:
(1) The fund seeks to replicate the performance of the Morningstar Minority Empowerment Index, designed to track large and mid-capitalization companies that have strong minority empowerment practices. The underlying index is constructed using company level indicators, scores, and indicator relevance weighting from Sustainalytics that include certain social criteria identified and compiled by the National Association for the Advancement of Colored People (NAACP) to measure the strength of minority empowerment practices and products or services for each company.  Based on that scoring, excluding those companies with a detrimental score for applicable controversies (as determined by Sustainalytics), the 200 best scoring companies (after applying an optimized weighting methodology) are selected as the final underlying index components.

The following social screens are used to determine the Minority Empowerment Composite Score that narrows the Index Universe. Each of the social screens addresses an issue that has a history of NAACP support.

1. Board Diversity. This indicator provides an assessment of the diversity of a company’s board of directors. Diversity of background can provide fresh perspectives in the boardroom and lead to better board decision-making.
2. Discrimination Policy. This indicator provides an assessment of the quality of a company’s policy to eliminate discrimination, including racial discrimination, and ensure equal opportunity.
3. Scope of Supplier Social Programs. This indicator assesses whether a company has supply chain/contractors’ social programs including a focus on racial diversity and empowerment, and the scope of such standards.
4. Digital Divide Programs. This indicator provides an assessment of the presence of programs that address the digital divide, i.e. the lack of access to modern means of communication/internet. Access to such means is often difficult for certain groups in modern society (e.g., people of color, poor, elderly) or people in certain regions.
5. Freedom of Association Policy. This indicator provides an assessment of the quality of a company’s freedom of association and collective bargaining policy, including its impact on racial minorities.
6. Diversity Programs. This indicator assesses the strength of a company’s initiatives to increase the diversity of its workforce, including racial diversity.
7. Supply Chain Monitoring. This indicator provides an assessment of whether the company has a supply chain monitoring system and/or whether there are other supply chain monitoring activities. Racial minority focused social standards are included within this monitoring.
8. Community Development Programs. This indicator assesses the strength of a company’s local community development programs. It does not focus on cash donations, but formal programs that promote long-term economic development among communities, including minority communities, directly affected by the company’s operations.
9. Minority-Inclusive Health and Safety Management System. This indicator assesses the strength of the company’s initiatives to manage employee health and safety and prevent accidents and occupational illnesses.
10. Conflict Minerals Programs. This indicator measures the strength of a company’s initiatives to eliminate conflict minerals from its products and its supply chain.

(2) The Impact Shares YWCA Women’s Empowerment ETF seeks investment results that track the performance of the Morningstar Women’s Empowerment Index. The index is designed to measure the performance of U.S. companies that have strong women’s empowerment practices. The index is constructed using company level indicators, scores, and indicator relevance weighting from Equileap, the fund’s ESG research provider, that include certain social criteria identified and compiled by the YWCA USA to measure the strength of women’s empowerment practices and products or services for each company, expressed in the form of a gender diversity score.

After excluding those companies that Equileap determines are (i) involved in the weapons, gambling, or tobacco industries, (ii) on the Norwegian Ethics Council List1 or (iii) that have experienced an applicable legal controversy, the following social screens are used in determining the Gender Diversity Score to narrow the list of eligible companies. Equileap determines a company’s Gender Diversity Score based upon its analysis of publicly available information, as reported by such company in its most recent annual report for its fiscal year end.

Each of the social screens for the Fund addresses an issue that has a history of YWCA support.

CATEGORY A: GENDER BALANCE IN LEADERSHIP & WORKFORCE

1. Non-Executive Board: Percentage of male and female as a proportion of the total number of non-executive Board members, as of the fiscal year end wherever available, otherwise as of the date of the latest filing.
2. Executives: Percentage of male and female executives as a proportion of the total number of executives, as of the fiscal year end wherever available, otherwise as of the date of the latest filing Executives are either defined by the company or represent those individuals that form the company executive committee/ board, management committee/board or equivalent.
3. Senior Management: Percentage of male and female senior management, as a proportion of the total number of senior management, as of the fiscal year end wherever available, otherwise as of the date of the latest filing. Senior management are defined and reported by the company.
4. Workforce: Percentage of male and female employees at the company, as a percentage of total employees.
5. Promotion & Career Development Opportunities: Ratio of male and female employees in management compared to ratio of each gender in total employees.

CATEGORY B: EQUAL COMPENSATION & WORK LIFE BALANCE

6. Fair Remuneration: Demonstrates a commitment to ensure payment of a fair wage to all employees, even in those countries that do not legally require a minimum wage.
7. Equal Pay: Commitment to provide comparable wages, hours, and benefits, including retirement benefits, for all employees for comparable work in country of incorporation.
8. Parental Leave: Paid leave programs for child and dependent care to both women and men (maternity leave, paternity leave, dependent care) in country of incorporation.
9. Flexible Work Options: Option for employees to control and/or vary the start/end times of the work day and/or vary the location from which employees work in country of incorporation.

CATEGORY C: POLICIES PROMOTING GENDER EQUALITY

10. Training and Career Development: Ensures equal access to training and career development.
11. Recruitment Strategy: Commitment to ensure non-discrimination against any type of demographic group. This could be in the form of an equal opportunities policy, as described by the company.
12. Freedom from Violence, Abuse and Sexual Harassment: Prohibit all forms of violence in the workplace, including verbal, physical and sexual harassment.
13. Safety at Work: Commitment to the safety of employees in the workplace, in travel to and from the workplace, and on company related business, and ensure the safety of vendors in the workplace.
14. Human Rights: Commitment to ensure the protection of the rights of all people it works with including employees’ rights to participate in legal, civic and political affairs.
15. Social Supply Chain: Commitment to reduce social risks in its supply chain such as forbidding business-related activities that condone, support, or otherwise participate in human trafficking, including for labor or sexual exploitation
16. Supplier Diversity: Commitment to ensure diversity in the supply chain, including a focus to ensure female-owned businesses in the supply chain.
17. Employee Protection: Systems and policies for the reporting of internal ethical compliance complaints without retaliation or retribution, including but not limited to access to confidential third-party ethics hotlines or systems for confidential written complaints

CATEGORY D: COMMITMENT, TRANSPARENCY & ACCOUNTABILITY

18. Commitment to Women’s Empowerment—Recognition and commitment to ensuring women’s empowerment in the workplace.
19. Audit- Undertaken and awarded an independent gender audit certificate by an Equileap recognized body.

 

 

 

 

 

 

 

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