An ETF to Save the Oceans Splashes into the Market

Episode 14 of The Green Investor podcast from Investopedia (June 9, 2022)

The Biden administration declared a 24-month tariff exemption for solar panel products from several Southeast Asian nations and announced the use of the Defense Production Act to promote more domestic production of solar products. The move comes just as a Commerce Department investigation into the solar industry, particularly in China and Taiwan, has made it more difficult to import solar components into the U.S.. Solar tariffs against those countries will remain in place. The tariffs were originally put in place by the Trump administration, with Biden announcing a four-year extension back in February. Publicly-traded solar companies in the U.S. last quarter reported their worst quarter since the beginning of the pandemic, with installations dropping 24% from the same quarter a year ago, according to the industry's trade group.

The U.S. Securities and Exchange Commission came out last week with its most aggressive plan yet to stamp out greenwashing in the financial industry. Specifically, the agency is targeting those funds that have been luring in billions of dollars, marketing themselves as stewards of environmental, social and governance (ESG) principles. The SEC has proposed two rules. The first would expand an existing regulation to ensure funds labeled ESG invest at least 80% of their assets in a way that truly lines up with that strategy. The second would require additional disclosures in annual reports and marketing materials that show how a fund or financial advisor takes ESG into consideration when investing, and also calls for funds to report their greenhouse gas emissions.

Austria issued its first green bond recently, raising €4 billion, or $4.26 billion, to fund sustainable projects, joining the Netherlands, Germany and Britain in the sustainable income market. The lead manager said the issue had more than €25 billion in investor demand, underscoring continued interest in green bonds, despite the downturn in global markets this year. Greece intends to launch its first green bond later this year, which will be a milestone given Greece's recent history in the debt markets.

Japan is asking its citizens and companies to conserve electricity by using less light and turning down the temperature of their refrigerators. Japan, like many other nations, is facing a summer energy supply squeeze and escalating fuel import costs amid the yen's plunge. Prime Minister Fumio Kishida's government convened the first national meeting in five years dedicated to discussing the power outlook, as it prepares for tight supply through the coming months and during the winter, according to the Japanese Trade Ministry.

A new set of voluntary guidelines for Chinese companies to report environmental, social, and governance metrics just took effect, paving the way for what mandatory disclosures might look like in the future. The guidelines, developed by China's biggest companies and government-backed think tanks, lists more than 100 metrics that are generally aligned with a global benchmark of draft rules issued by the International Sustainability Standards Board. China is the world's largest emitter of greenhouse gases, and it's trying to catch up to global peers on reporting standards as part of its push to reduce emissions and meet a net zero target by the year 2060.

Researchers of a new peer-reviewed study say they've developed the first detailed roadmap for how the United States can achieve its ambitious climate pledge to slash the country's greenhouse gas emissions in half by the year 2030. The study, published in Science magazine last month by researchers at the Energy Systems and Climate Analysis Group at the Electric Power Research Institute, found that it is both technically feasible and financially beneficial for the U.S. to rapidly transition to clean power sources and electric vehicles. Specifically, the study found that the U.S. can reduce in half its emissions in eight years by focusing on its two most carbon-intensive sectors: electricity and transportation. The easiest path? By 2030, more than half of the new cars sold in this country would need to be electric, and at least 80% of the electricity produced would need to come from solar, wind, or renewable sources for the U.S. to achieve its greenhouse gas-cutting goals.

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Meet Doug Heske and Phillipe Cousteau

Doug Heske, CEO of Newday

Doug Heske is the Chief Executive Officer (CEO) of Newday Impact, a financial services company focused on addressing global issues and fostering positive change. Doug has served as CEO of Newday since 2016, and is based out of the San Francisco Bay Area. Prior to his current role, Doug served in multiple positions throughout the financial services industry. His prior roles include a position as Managing Director and Head of Client Services at Stifel, President and CEO of NCPI, and Regional Director at Piper Jaffray.

Phillipe Cousteau Jr.

Phillipe Cousteau Jr. is an oceanographer and environmental activist, as well as the son and grandson, respectively, of renowned conservationists Phillipe Cousteau Sr. and Jacques Cousteau. Phillipe has continued the work of his father and grandfather by educating the public about environmental and conservation issues. In 2017, he received an Emmy nomination for hosting the syndicated science series Awesome Planet. In addition, Phillipe is the author of two award-winning books, Going Blue and Make a Splash.

What's in this Episode?

The United Nations World Oceans Day is being celebrated this week, and while we should celebrate and protect our oceans every day, it's always good to focus on our most precious of natural resources, even for one day alone. And now you can invest in helping protect our oceans through a new exchange traded fund (ETF) from New Day Impact, a San Francisco-based asset management and financial technology company that brings responsible investing to those who seek investments that reflect their values, kind of like the folks who listen to the Green Investor Podcast. The New Day Ocean Health Exchange Traded Fund, which trades under the ticker AHOY, launched this week, and it aims for long-term capital appreciation through investments in companies that are diverting ocean-bound plastic waste, supporting sustainable fisheries, controlling ocean acidification caused by CO2 emissions, and actively using strategies to combat ocean pollution and other threats to marine health. Doug Haski, the CEO of New Day Impact, is behind the team bringing that ETF to market, and they are doing it with EarthEcho International, an environmental nonprofit organization established by Philippe and Alexandra Cousteau in honor of their father, Philippe Cousteau Sr. and their grandfather, the legendary explorer Jacques Cousteau. Doug and Philippe, our special guests this week to talk about the launch. Welcome both of you to the Green Investor Club.

Doug: Caleb, Thank you very much.

Phillipe: Thank you for having me!

Caleb: Doug, let's start with you. This is your first ETF, I believe. Why did you choose this theme for your maiden voyage, so to speak?

Doug: It is, and Caleb, thank you so much for having us on the show. This is a very, very important day today. It's actually the 30th anniversary of World Oceans Day. And when we think about the connection between what is our most important environmental ecosystem of the oceans, there couldn't be a stronger link to climate and climate change. So we wanted to bring something to market that was foundational to making the changes that we need to make to support a healthier planet and for all of its inhabitants.

Caleb: Explain the tie-in with EarthEcho and the Cousteau family. And then, Philippe, I want to get to you with a couple of questions.

Doug: As a part of the work that we do at Newday, while we are an institutional asset management organization, we often times get referred to as more of a collective action platform. We have made a very deliberate decision to form what are these incredibly important and distinguished relationships with organizations like EarthEcho International, and we could not imagine having a better organization with a better leader, in Philippe, who has decades of experience—his own work and family's work in supporting ocean ecosystems and ocean health. So we are, as an organization, very focused on the cause of democratization in providing education for responsibly-minded individuals and institutions so that they can make better, more responsible decisions. So EarthEcho has been a big supporter of ocean literacy, in particular with the younger generation that will be the leaders of tomorrow in getting this work done.

Caleb: Phillipe, this is an unusual but very interesting way of raising both awareness and money for your foundation's efforts. We know a lot of philanthropists dedicate a lot of their money to marine protection, but we rarely see financial products dedicated to this effort. Why do you think this will work? 

Phillipe: Well, it's critical to recognize that we need financial markets moving in a consistent and positive direction. We need political will, we need social will, and we need our economy moving in a more restorative direction as well. And the potential in the value of an ETF in particular is exciting to me and our team at EarthEcho, because it democratizes access to these kinds of investments. It allows anybody essentially, you know, to invest under the Ticker AHOY so that they can move capital and start having restoration of the oceans represented on their balance sheet. And that's critical to start making financial institutions and individuals really stand up and take notice of how important the ocean is, not just to our health, but also to our economy. And so this is another way, another tool that we can leverage in order to drive positive change, to drive resources, but also to recognize and reward the companies that are leading the charge here that that we need so desperately.

Caleb: I love it because it's not just writing a check to an organization or writing a check to EarthEcho, even though you guys are going to get 5%, I believe, of some of this money. This is about investing in the companies that are making the change. So for investors, it's not just "I'm going to write the check and I'm going to call that a a write off." It's actually actively participating as an investor. Tell us more about the EarthEcho Foundation. What are your goals and what are your big projects right now?

Phillipe: So Earth Echo International was founded about 16 years ago, and as an organization, we'VE become one of the leading youth environmental education organizations in the world. We're really focused on building a global youth movement to restore and protect the ocean. And I want to point out one word: restore. That's really, really important. We're big believers. You know, I've been at this my entire life on the third generation of a family that's dedicated themselves to this work. And what we've witnessed over those three generations, really, literally, my grandfather being the first to scuba dive, scuba diving with underwater cameras and documentaries. What we've witnessed over those past 75 or so years has been a catastrophic decline in the health of the ocean and biodiversity. Fortunately, the good news is we've also seen a growing movement of a younger generation that understands these issues, is connected to these issues, and recognizes that we literally cannot have a future without a healthy ocean. We can't solve the climate crisis about solving the ocean crisis. And so fundamentally, as an organization, EarthEcho was founded to help give resources and tools, knowledge and training to young leaders around the world, and that's what we do. We work with hundreds of thousands of young people around the world every year, providing resources and tools and gathering and community to mobilize a global movement, because that's what we need. We need a new generation to wake up and recognize that the path to true sustainability is by restoring the ocean to abundance.

Caleb: Yeah, I was afraid to ask, but I'm going to do it anyway. You and your family have a better sense of what's happening below the surface of our oceans than most people out there. And the headlines are bad and they're getting worse, but you did give me some optimism there. Are we too late to make a real change, or do you see real change actually happening—we're never going to get back to the way it was—but how optimistic are you?

Phillipe: Well, you know, I choose optimism over anything else. I think hope is the most important virtue. And, you know, when I look at what's happening in the world today, yes, there is an extraordinary amount of bad news. But the optimistic and determined and, in many cases motivated, somewhat angry, I will say, young people out there about what's happening to their world, and seeing how sophisticated they are. And we're not just talking, you know, beach cleanups and volunteer drives. We're talking young people that are raising enormous sums of money, that are passing laws, that are starting businesses, that are mobilizing movements of, you know, as we saw with Great Thunberg. But there are so many of young people like her around the world that are mobilizing millions of young people to fight for these issues. But we're also seeing, and this is where our partnership with Newday comes in. We're also starting to really see, I think, a genuine commitment on the part of corporations to recognize that they have a very, very important role to play, both in reducing usage of plastics and all those kinds of things, but also looking at how we actively invest in innovation. And so when we think about new materials science—seaweed, for example, is being developed to replace fabrics, cotton being used as a plastic alternative. When we see offshore renewable energy skyrocketing, when we see these new commercial, business-based enterprises that are tapping into the restorative power of the ocean, not in an exploitative way like oil and gas, but a restorative way—that really gets me and my colleagues very excited about the future.

Caleb: That's great. Doug, let's talk a little bit about the portfolio: what's in AHOY, what kind of companies are included? What's the criteria you're looking for that you were looking for as you assembled this ETF?

Doug: Yeah. So across the entire portfolio, we will have a combination of what we define as direct impact companies, or pure play companies, and indirect impact companies. So, direct impact companies being organizations or constituents like Tetra Tech or Jacobs Engineering, which is one of the top ranked global environmental firms doing really important work associated with ocean seawalls and things like that, or organizations like Xylem, which is a leading provider of technology solutions to address water issues and things like that. We also include a group of international organizations that are working on sustainable fishing and aquaculture. So every company in the portfolio will have some level of impact, whether it be direct or indirect, on ocean health.


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Caleb: So this is your first, but you're going to learn or you're probably already learning how difficult it is to not just launch an ETF, but to market it to attract investors. Speaking of podcasts like The Green Investor is one way of doing it, but how are you going to get it out there and how are you going to raise the awareness about this product to let people know this is a way you can invest and do right at the same time, which is, I think, where a lot of this theme needs to go. You need to have solution-oriented investing. If you want big money to follow.

Doug: Caleb, that's correct. And we have spent the last five years since the inception of our organization building really strong relationships with foundations that are working in the area of ocean health, but also big family offices that are directing capital to these important causes. In addition, and this belief had originally pointed out that we are very much committed to this idea of democratization. It was one of the reasons that we did make the decision to deliver the portfolio as an exchange traded fund, so virtually anybody anywhere in the world that has access to an account at a financial institution can own the AHOY ETF. And so some of these institutions include organizations like Schwab, Fidelity and TD Ameritrade, and even Robinhood, where there is a high concentration of younger people opening investment accounts today.

Caleb: Yeah, that's absolutely true, and giving them access is key, and making sure they understand and are educated about it is super important as well. And Phillipe, I know that's something you're passionate about as well. You have a pretty big platform. How are you going to be using it to sort of let people know about this beyond conversations like this? This is something you obviously believe in and you've tied your organization to it, but what can you and your family do to lean into it as well?

Phillipe: Well, you know, certainly through through our network at EarthEcho, letting young people, you know, help us be evangelists for the importance of how we look at our investments in financial markets and how those can be a force for good or a force for bad, and you know, of course, the press, social media, etc. But I just want to point out that when I think about the conversations that I have with people about this, it's overwhelming to try and sift through who's good, who's bad, who's doing it, etc. And really what AHOY does is it allows people, anyone, anywhere, as Doug pointed out, not only to invest in this, but invest in confidence and recognize that we're doing the heavy lifting for them. And so this is, I think, one of a growing movement of these impact investment funds that are really authentic, and really looking at how we can provide an easy way for people to begin to engage in this social and environmental impact investment movement.

Caleb: Yeah, by picking the companies and showing the criteria and how the portfolio is assembled, I think that's so critical—education—and we believe in it here at Investopedia. First step in anything is understanding the situation and understanding the companies you'll be invested in. And this is for both of you, but Doug, take it first. ESG, SSRI, so many names out there, so much confusion in the marketplace, but also a lot of greenwashing going on right now. And to launch an ETF right now that's so important, focusing on such an important topic in the midst of a lot of the chaos around the nomenclature and what we call things. It's got to be very tricky. How are you navigating that?

Doug: Yeah, Caleb, and I think the skepticism that exists there today is somewhat justified. There are a lot of major financial institutions that have rolled out what they define as ESG and impact investment portfolios, but very little to show for regarding impact outcomes. So we at Newday, through the AHOY ETF, are taking a very different approach to this. So we understand that the exchange of one common share from one holder to another doesn't necessarily translate to impact. This is an actively-managed portfolio, so we are actively engaging with the corporate organizations on issues of materiality relative to ocean health within the portfolio. That's number one. Number two, we are capturing the insights from organizations like EarthEcho International and a number of others regarding the important work that's going on associated with ocean health today and the things that are really moving the needle in basic and transformational ways. The third piece of it is something that you've already identified, in that we are taking a percentage of our revenues associated with AHOY and directing them back—directing those revenues back to EarthEcho International—so that they can continue to do the work that they can do from a grassroots organization perspective. So it's critically important that shareholders in AHOY, that owners of businesses, that public securities use their shareholder voice to advocate for change. It's a very important part that we passed today.

Caleb: And sure, on your side, Phillipe, you probably hear pitches all the time from financial services companies or various companies that want to associate, or align, with your family name or with your foundation or with your efforts. How did you select to work with Newday and how do you sift through who's real and who's not in a situation like this where, again, people want to work with you? It's obvious.

Phillipe: You know, it's not an easy thing. And oftentimes these days, we take our time and most of the time relationships like that don't work out or come to fruition—those kinds of requests, I will say. We've built a relationship over three years now and it's been a long time of building trust and building that relationship. And we take that very, very seriously, and it's walking before you run. And that's kind of what we've been building up over time. So this is not something that's just come together the last few months—this is something we've been actively collaborating on for almost three years now. And that's how we like to go: slow and steady, build trust, build relationships, and there's very few that we choose to do that with, but we've done it with Newday.

Caleb: You put the time into it, and obviously you guys have a good working relationship. If this is as successful as you want it to be in your wildest dreams, looking out two to three years, Phillipe, are we going to see more ETFs like this? What does this mean and what do you envision manifesting if this works out great?

Phillipe: I think a couple things. One is, yes, one would need to start to set a baseline standard for, you know, to help people sift through some of the criticism and, you know, some of the criticism is warrented out there around this movement. That does not discredit or mean that the movement itself is not valuable and should not be embraced and advocated for, and advanced. So setting a standard that people can look to and say that's how to do it. And of course, preaching a volume can really impact and continue to support EarthEcho's youth leadership, education, and training movement. And as we grow our footprint around the world and to continue to engage with all the young people that we do, the resources that they can come to us from AHOY will just continue to help us grow our impact. And that's a critical metric by which we calculate success.

Caleb: It's a fascinating model. And I love the fact that it's active—but not activist. It's participating in the growth of these companies involved in the education of folks in the sector. And you're aiming the money at companies that are trying to do the right thing, so I wish you both all the success in the world. And we're going to be tracking this pretty carefully. I hope it works out and I hope we see a lot more ETFs like this in the future. Doug Heske, the CEO of Newday Impact, and Philippe Cousteau from the Cousteau family and of EarthEcho International. Thanks so much for joining the Green Investor.

Phillipe: Caleb, thanks so much for having us. Appreciate it.

Doug: Caleb, thank you.

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