Humankind ETF Review: Is “Humankind Value” Investing a Good Strategy in 2022?

Environmental, social, and governance (ESG) investing has been one of the fastest-growing trends in ETFs. With no universal definition of ESG, ETF issuers have developed different approaches to the theme. Learn how the Humankind ETF tackles the thorny issue of ESG investing.

David Dierking   Updated June 14th, 2022

What is the Humankind ETF?

Humankind Investments developed the Humankind ETF because it believes that investing shouldn’t be just about maximizing returns. Rather, it should be about finding high-quality investment opportunities from a universe of companies that benefit humanity. This approach can benefit shareholders and society at the same time.

Humankind’s approach is not the same as that of ESG investing in general. Most ESG funds rely on ESG scores from rating agencies like MSCI and Sustainalytics, but these scores try to measure environmental, social and governance risks a company may face. They don’t try to measure if a company benefits the world.

Instead, Humankind Investments seeks to invest in businesses that benefit humanity.

What does the Humankind ETF invest in?

The Humankind U.S. Stock ETF (HKND) tracks the performance of the Humankind U.S. Equity Index. It invests in roughly 1,000 companies that Humankind determines benefit the world the most. 

How are these companies selected? Humankind gathers information from several independent data sources to assess the following criteria:

  • Investor Value – based on multi-year profitability
  • Customer Value – based on the products and services a business offers
  • Employee Value – based on salaries, bonuses and benefits
  • Societal Value – based on the costs and benefits of operating the business

Humankind assesses various factors like water sanitation, healthcare, discrimination, pollution, and the diversity of supply chain partners. Weightings in the final index are based on the final Humankind value score. Higher values receive higher weightings, with individual components accounting for no more than 4% of the index.

HKND has $104 million in assets and an expense ratio of 0.11%. The fund receives an AA ESG rating from MSCI, an ESG rating agency.

What are the Humankind ETF’s top holdings?

HKND leans very heavily into large-cap stocks, but its sector composition looks much different than that of the S&P 500. The fund’s top three sectors are healthcare (30%), consumer staples (15%), and tech (12%).

HKND Holdings%
Health technology20.0%
Process industries11.2%
Consumer non-durables9.5%
Technology services9.3%
Finance7.6%
Health services7.4%
Producer manufacturing6.9%
Electronic technology6.6%
Communications5.2%

As of 5/23/2022

Because of HKND’s tilt towards defensive sectors, it’s less volatile than the S&P 500. Looking at the standard deviation of historical returns, the fund has been about 20% less volatile than the broader market. This could make HKND ideal for investors looking for a more conservative approach to stock investing.

The fund’s top ten holdings feature some familiar names like Alphabet, Google’s parent company, Apple, and Microsoft. However, other top holdings are pretty unusual for an ESG fund. They include healthcare stocks like Proctor & Gamble and agricultural businesses like Bunge and Corteva. This aligns with the thesis that companies feeding and healing the world should be in an index of impact stocks.

HKND Holdings%
Verizon Communications4.1%
Alphabet Inc4.1%
Proctor & Gamble3.1%
Microsoft Corp2.8%
Apple Inc2.7%
Deere & Co2.1%
Johnson & Johnson2.0%
Bunge1.9%
Pfizer Inc1.9%
Corteva Inc1.8%

As of 6/13/2022

How has the Humankind ETF performed?

This fund has a limited track record since its February 2021 launch, but early results are encouraging.

Fund1 MonthYTD1 YearSince Inception
HKND ETF-6.5%-14.7%-8.0%2.0%
S&P 500-6.4%-21.6%-12.0%-1.5%

As of 6/14/2022

HKND is beating the S&P 500 by over 3% from inception through mid-June 2022. The fund has also managed to outperform the broader market throughout 2022 during an especially volatile environment. This shouldn’t come as a surprise because HKND invests less in volatile tech stocks and more in stable, cash-generative businesses. It is also very diversified, with over 1,000 holdings.

Is Humankind a good ETF?

HKND is only a little over one year old, but it’s off to a strong start. Its strategy of investing in the ESG-friendly names from the U.S. large-cap stock universe has beaten the S&P 500 with less risk since its inception.

Many ESG strategies exclude weapons, nuclear power, alcohol, tobacco, and other sin stocks. HKND’s strategy goes one step further by giving higher scores to companies that impact the world positively. This makes it unique (it has just a 38% overlap with the iShares MSCI USA ESG Optimized ETF) and potentially a more effective way of investing responsibly.

The 0.11% expense ratio is also very reasonable.

🔔 Looking for more options? Check out this list of top ESG ETFs.

Author: David Dierking, CFA

David Dierking has been writing about investment strategies using ETFs and mutual funds since 2007. He has extensively contributed to The Street, Investopedia, Seeking Alpha, ETFdb.com, ETF Trends, and ETF Daily News. David received his BA in finance from Michigan State University. He has also been a CFA Charterholder since 2004.

NOT INVESTMENT ADVICE. The content is for informational purposes only; you should not construe any such information as investment advice.

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