Alternative Investments/ESG: A New ETF From First Trust Focuses On Human Dignity
The First Trust fund targets companies from emerging markets that have a high “Human Dignity Score.
First Trust Advisors has introduced a novel exchange-traded fund (ETF) designed to invest in companies hailing from emerging markets that prioritize human dignity. This innovative fund, known as the First Trust Emerging Markets Human Flourishing ETF (FTHF), is now listed on the New York Stock Exchange under the ticker symbol FTHF.
The primary objective of FTHF is to mimic the price and yield performance of the Emerging Markets Human Flourishing Index, exclusive of fees and other expenses. The ETF’s selection criteria are centered on identifying companies in emerging markets with a high “Human Dignity Score,” as assessed by the reputable nonprofit organization, Freedom House. Freedom House specializes in research and advocacy related to democracy, political freedom, and human rights. (Vettafi)
Inclusion in First Trust Emerging Markets Human Flourishing ETF requires that securities are part of the Bloomberg Emerging Markets Large- and Mid-Cap universe, meet specific market capitalization and liquidity standards, and originate from countries with a commendable Human Dignity Score.
The Human Dignity Score is determined by assessing emerging market countries using data points collected by Freedom House. The score is primarily derived from two factors: freedom of expression and belief (80%) and freedom from religious persecution (20%). The former evaluates the presence of free and independent media, the ability for individuals to practice and express their religious beliefs, academic freedom, and the freedom to voice personal opinions on sensitive topics. The latter pertains to the extent to which a country ensures equal treatment of various population segments in terms of religious beliefs.
Only companies headquartered in countries ranking in the top 50th percentile of the Human Dignity Score rankings gain inclusion in the index. These businesses are rigorously screened to exclude those associated with seven defined controversial practices.
The index comprises the top 150 securities based on free-float market capitalization, with the 100 highest “Quality Score” securities being selected. The Quality Score is determined by an analysis of a security’s variability, profitability, and leverage.
The weighting of selected securities is influenced by a combination of modified free-float market capitalization, country exposure limitations, and sector exposure restrictions. The index is reconstituted on an annual basis and rebalanced semi-annually.
The First Trust Emerging Markets Human Flourishing ETF carries an expense ratio of 0.75%.
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