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a part of that anymore. I wanted to
contribute to that pool and make it
bigger.” So two years ago, he began
considering other possibilities.
Soon enough, Cousteau settled
on starting a socially responsible
exchange-traded fund (ETF), similar in many ways to a traditional
mutual fund, which is open to institutional and individual investors
alike. (A main difference is that
shares in an ETF can be traded on
a stock exchange.) In October, his
Global Echo fund—managed by his
financial partner, AdvisorShares,
and traded on the NYSE—will debut.
Fund managers will invest Global
Echo’s assets only in companies that
abide by specific social and sustainability guidelines. A portion of its
management fees will be directed
toward a new foundation Cousteau
has formed.
What would success look like?
If the fund succeeds in gathering
$50 million to manage—a level
plenty of ETFs reach—it could spin
off management revenue of
$400,000 a year, a large portion of
which Cousteau could pour into his
pool of causes.
And it’s a large pool. He says part
of the revenue will go to his foundation, and the rest will be divided
among a wide range of worthy
recipients—environmental issues
and social entrepreneurship initiatives such as microloans.
“Much of that is meant to help
women in developing countries,”
he says. “This was something my
grandfather talked about a lot. Tar-
geting women is key in developing
countries. It allows them to go to
school, to say how many children
they’re going to have, which drives
the issue of population and how
their children will be educated.
Women are the best investments
in developing countries.”
But although Cousteau’s celeb-
rity could bring new energy to the
world of socially responsible ETFs,
there’s no guarantee his fund will
“When I apply for [a
grant] and get it,
that means
someone else
doesn’t. I didn’t
want to be a part
of that anymore.”
gather $50 million to invest with.
According to Matt Hougan at
Index-Universe, a publication that covers
the ETF industry, socially responsible mutual funds tend to be
smaller than other funds—and investors can be wary of actively managed ETFs (compared with funds
that track an index, such as the S&P
500) because they tend to under-perform the market.
Part of the problem: Socially
responsible ETFs hold fewer companies than traditional ETFs, which
means their risk isn’t as diversified,
says Mitch Tuchman, CEO of online
investing advisory firm Market-Riders. This isn’t a matter of policy;
it’s just that when a fund invests
only in companies whose practices
it feels a kinship to, there are far
fewer investments to choose from.
The world isn’t stuffed with publicly
traded wind-energy companies.
“I wish them the best,” Hougan
says, “but there are just a lot of
things stacked against it.”
Cousteau nevertheless ap-
proaches his new effort with the
spirit of an explorer. And it isn’t just
the share of management fees that
motivates him. In the coming years,
he points out, the earth’s population
will grow by 2 billion people. Not-
for-profits don’t have the firepower
to solve the challenges of that new
world. But private companies do,
which is why Cousteau wants to
invest in them. “We just can’t do
things the same way,” he says.
