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Wednesday, June 02, 2021

An Activist ESG Startup Enters the ETF Biz

by: Neil Anderson, Managing Editor

An ESG-focused, activist investing entrepreneur is bringing his new startup into the ETF business by creating an activist ETF.

Jennifer Lisa Grancio
Fund Management at Engine No. 1
Last Friday, the team at Fund Management at Engine No. 1 LLC filed to launch the Engine No. 1 ETF Trust and its first ETF, the Engine No. 1 Transform 500 ETF. Fund Management at Engine No. 1 is a new sibling of Engine No. 1, a San Francisco-based activist investing firm unveiled in December by owner and founder Chris James. Jennifer Grancio, a former longtime iShares distribution leader, serves as CEO of Fund Management at Engine No. 1.

The Transform ETF will track the Morningstar US Large Cap Select Index. The idea behind the fund, according to Engine No. 1's filing with the SEC, is "to encourage transformational change at the public companies within its portfolio through the application of proxy voting guidelines developed by the Adviser that are based on a commitment to protecting and enhancing the value of its clients' assets and to aligning shareholder and stakeholder interests through favoring actions that encourage companies to invest in their employees, communities, customers and environment." In other words, the ETF will be a passive equity fund in terms of investment selection and an activist ESG fund in terms of proxy voting and the like.

Molly Landes, another BlackRock iShares alumna and a portfolio manager at Engine No. 1, will PM the new ETF. BBH will serve as the fund's administrator, custodian, fund accountant, and transfer agent, Cohen & Company as the fund's independent accounting firm, Foreside Financial Services, LLC as the fund's distributor, ISS as the firm's independent proxy voting advisory firm, and Schulte Roth & Zabel LLP as the fund's legal counsel. Foreside Fund Officers Services, LLC will also provide the new fund with a chief compliance officer, a principal financial officer, and a treasurer. The expense ratio for the fund has not yet been disclosed.

Engine No. 1 had 22 employees (not counting clerical staff) and $240 million in AUM as of its most recent form ADV, which was filed on May 4. Yet the firm made headlines last week when it landed two of its nominees on the board of a big energy company, ExxonMobil, so Bloomberg and Reuters both picked up on the ETF filing. 

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