Amberjae Freeman is Board Chairperson and Chief Executive Officer of Etho Capital and is currently an expert advisor and partner for the ETF Manager Group’s (ETFMG) ETHO Climate Leadership US ETF.
Ms. Freeman heads Etho Capital and its board to shape strategy and execute vision. She also serves on the board of directors of The Forum for Sustainable and Responsible Investment (US SIF) and is on the Advisory Board of the South Bay Economics Institute (SBEI) at CSU Dominguez Hills.
Ms. Freeman’s career in sustainable finance began 15 years ago when she received dual fellowships with the Clinton Global Initiative in New York City and the Clinton Hunter Development Initiative in Kigali, Rwanda. Prior to joining Etho Capital, Ms. Freeman developed innovation-focused thematic portfolios for fintech startup Swell Investing.
As senior analyst for the SRI Wealth Management Group at the Royal Bank of Canada (RBC), she developed proprietary ESG and impact research and mission-related investment solutions for institutional, foundation, and endowment portfolios representing US$2 billion in assets. Ms. Freeman has served as an adjunct professor of political science and economics at Santa Barbara City College (SBCC), and coordinated country-specific research to support asylum cases for the Center for Gender & Refugee Studies (CGRS) at UC Hastings College of the Law.
Ms. Freeman holds a bachelor’s degree and a master’s in Global & International Studies from the University of California, Santa Barbara.
In this 3,404 word interview, exclusively in the Wall Street Transcript, Ms. Freeman reveals her Etho Capital fund methodology and applies it to her top stock picks for investors.
“What we found is that if you consider a company’s total environmental footprint — from product components all the way through to the finished product and beyond — the companies that manage their carbon emissions and environmental resource use better relative to their subsector peers tend to have stronger long-term stock performance. We observed a correlation between these factors. So we developed the ETHO ETF and the index with this relationship in mind.
Our process has five steps: The first step is quantitative. We assess the total carbon emissions for each company in the U.S. stock market and identify companies whose performance is 50% better than the median average of their sub-industry group. We add those to the first tranche of companies that may be eligible for inclusion.
The second step includes the identification and avoidance of companies whose business activities are inconsistent with most ESG mandates. I should say here that all of our investment products are fossil fuel free.
We do not invest in companies that extract and sell oil and gas or coal. Those securities are automatically ineligible. Additionally, companies that generate significant income from alcohol, gambling, tobacco, and the manufacture and sale of weapons are also avoided.
Now, we understand that many investors find exposure to these particular industries perfectly acceptable. However, the negative environmental consequences of tobacco cultivation and the pollution and human health consequences associated with smoking cigarettes is well documented, as is the environmental degradation and pollution that results from violent conflict. As such, these business activities are not in alignment with our environmental sustainability focus.
Next, we do a qualitative assessment of each company to identify material environmental, social, and governance risks.
For example, if a company has a pattern of health and safety controversies, or questionable accounting practices. Such controversies can hamper a company’s business activities, which in turn can negatively impact the company’s ability to create long-term value for shareholders.
Removing companies with a significant pattern of material ESG risks and/or are unresponsive to engagement efforts helps us further distill our list.
Our process identifies positive climate and ESG leaders and then mitigates risk through the avoidance of companies that demonstrate behaviors that are inconsistent with the ESG concerns that are material to their business.
We also include information we receive from a variety of industry subject matter and civil society experts. This is the fourth step in our process.
We keep tabs on the corporate concerns that non-governmental organizations such as US SIF, As You Sow, Rainforest Action Network, etc., are paying attention to and raising awareness about to get even more granularity about company ESG opportunities and risks.
We also leverage industry expertise to learn about new technologies and innovations being developed at companies, with an eye to those that help address our social and environmental challenges. We see these as powerful growth drivers.
Finally, in the case of the ETHO ETF and its index, we equal weight the constituents. This is a diversified product. The ETHO ETF is designed to be a sustainable alternative for core U.S. equity index offerings (e.g. Russell 3000, S&P 500).
We find that by equal weighting the constituents in the portfolio we are able to provide an additional layer of financial risk management in line with these popular broad-market U.S. indices.”
One example from the Etho Capital ETF is the well known stock Tesla:
“Tesla (NASDAQ:TSLA) is one of our top holdings, and that weighting that you’re looking at is not based on how we weighted our portfolio. As I mentioned previously, the ETHO ETF is equal weighted. Its current position in the top 10 indicates how its stock price has moved since it was added to our index.
In the case of Tesla, our research identified it as a climate leader relative to its ICE-based peers.
Additionally, Tesla is not just an automobile manufacturer. We think of it as an integrated energy solutions company. Its innovations in batteries, its solar panels, its work in autonomous vehicles, etc., make its climate leadership case very strong.
Sure, Tesla makes electric vehicles — you know, one of the central problems that ESG practitioners do not talk about or contend with well is the relationship between the proliferation of renewable energy and EVs and the significant human and labor rights issues associated with the extraction of the metals and minerals needed to produce these renewable/sustainable products.
Consider cobalt in particular. The largest deposits of cobalt in the world are generally found in the Democratic Republic of the Congo, which is known for its gross human rights abuses.
Child labor, forced labor, and incredibly horrific violence against women is endemic in this region and much of it involves the control of cobalt and other essential mineral resources.”
To get more insight into the Tesla stock pick, and many others in the Etho Capital ETF, read the entire 3,404 word interview, exclusively in the Wall Street Transcript.