Ellevest

Magazine

Our Commitment to Racial Justice

By Ellevest Team

Several weeks ago, Ellevest CEO Sallie Krawcheck wrote an op-ed about our commitments as a company to fight systemic racism. We’re serious about these commitments, and about deepening them as we continue to push forward. Here’s an update of what we’ve done in the past weeks, and what we’ve got in the works.

Changing the investment products we offer

This is a big one for us, because we’re in a position to help create change in ways that others can’t. Financial services is a huge system, which means that it’s subject to systemic racism. This is obvious when you begin to look for investment offerings with specific mandates for racial justice. (Very few exist.) As a company that offers both a money membership and a Private Wealth Management service, we have a few different levers we can pull.

Milestones:

We’ve made changes across both our digital membership and in our Private Wealth investment offerings. In Ellevest Impact portfolios for our digital members, we’ve expanded our target investments with the Access Community Capital mutual fund. Ellevest investors’ funds are now directed into both women-owned businesses and businesses owned by BIPOC people (aka Black people, Indigenous people, and other people of color). We also target pools of mortgages owned by low-income female and minority heads of households, when such information is shared and available, and we’re actively seeking investments in communities with predominantly residents of color.

We’ve also recently launched something new for our Private Wealth clients: an expansion of our Ellevest Intentional Impact portfolios.* We created them last fall to allow investors to shift their equity investments (aka stocks) away from companies with policies, practices, and products that may harm women and into companies that meet our criteria for doing better.

We know that we can’t fully support women’s equality without also being antiracist. And so we’ve widened our lens for these portfolios past gender-specific data to practices that have been shown to harm or exclude Black and brown people — and therefore Black and brown women. This includes private prisons and companies that profit from the prison industry through predatory practices.** You can read more about the Ellevest Intentional Impact portfolios here.

In progress:

While our Private Wealth clients’ portfolios can contain hundreds of individual stocks, we can’t do that with our online investing platform, which we offer to Ellevest digital members. Our online investing portfolios are made up of exchange-traded funds (ETFs) and mutual funds, which are baskets of pieces of ownership in many investments all at once. We use these because they allow us to create highly diversified portfolios at a low cost, no matter how much you have to invest.*** This is our duty to all of our members as a fiduciary.

So for Ellevest members, we’re doing the work of evaluating and researching our next step. As Chief Investment Officer Sylvia Kwan wrote last month, we don’t actually create the ETFs we recommend — fund companies do. We’re not able to delete any of the little pieces from those funds, and fund options that match the lens of our Intentional Impact portfolios are nearly nonexistent right now.

So what does that mean? Right now, four of our ETFs currently have minimal holdings in private prisons, which may show up in your portfolio. We’re actively looking for ways we might change that. So far, we have identified suitable replacements for three of the four, which we will be including in our Ellevest Impact portfolios for members, and we are seeking replacements for the fourth that would meet our investment criteria. We’re committed to pressing fund companies to create more funds that are fully divested from private prisons.

Another goal in progress for our Private Wealth clients is an alternative investment to direct capital to private businesses owned or led by women and people of color, including Black business owners. As with stocks, we can offer alternatives directly to our Private Wealth clients while still keeping their portfolios diversified.

We’re aware that being able to offer more options to invest for racial justice to our wealthier clients is a troublesome reflection of the systemic nature of the business overall — but we also believe that shifting more capital directly into the hands of Black-owned businesses and supporting leaders of color will help grow those businesses, create jobs, and create systemic change.

Creating a more inclusive product and message

This one’s also crucial: What works for some women as they learn about money and career won’t work for all. We have work to do so that our product is truly serving Black, Latinx, Indigenous, and Asian women (not just the “average” woman, who doesn’t exist). Outside of our product, we’re committed to using our social platforms responsibly to be inclusive of our entire community.

Continuing:

We’ll continue to amplify the voices and experiences of Black, Latinx, and Indigenous women and other women of color in our content. A few recent examples (you can look at our Instagram for many more, btw):

In progress:

We’re a research-based team. Right now, we’re setting up research to improve our product experience so it is more directed toward getting more money in the hands of all Black, Latinx, and Indigenous women+ specifically.

We’re examining ways that we as a company can support Black-owned businesses and Black creators — as well as other people of color. Specifically, we’re looking at new ideas to create partnerships that prioritize their success.

Making Ellevest a more inclusive workplace

As an employer, we’re working toward racial justice, not diversity. That means hiring and managing across lines of difference, looking for patterns, overrepresenting underrepresented groups at all levels, and making organizational change wherever we need to.

Milestone:

We’ve partnered with an equity and inclusion consultant to inform, strategize, and prioritize the work we will do to build an antiracist organization.

Continuing:

We’ll keep holding ourselves accountable by publicly sharing the demographic information of our company — and teams. We’ll keep giving our colleagues flexibility for protests and activism work (as well as any related self-care / family care they need). We’ll also continue organizing and scheduling optional time to do antiracism work with colleagues.

In progress:

We’re working to set goals around team composition. We’ll share them out, including our goals for Black executive leadership. You can bookmark this article to see with open positions and opportunities as they’re posted, and you can also check our Careers page.

New colleagues are only part of the goal; it’s also necessary to look at the processes and culture that exists now. We’ve identified three key goals on that path:

  • First, pay equity. We’ll launch an ongoing analysis to find and fix any inequities based on gender, race, ethnicity, or sexual orientation. We’ll also make sure we’re transparent about our compensation framework — both within Ellevest and to the public.

  • Along with our mission of getting more money in the hands of women, everything we do at Ellevest stems from a set of core values. We’ll re-examine these values as a group to be sure they’re inclusive and don’t contain any cultural biases that reinforce white supremacy.

  • Anti-bias, antiracist, and allyship training aren’t a magic wand you can wave to change a company culture, and we know that. But they are valuable. We’re committed to making them regular, meaningful, and uncomfortable when they need to be.

We’ll keep learning, keep expanding, and keep deepening these commitments. We’ll report back several times a year on our progress toward them, even if we’ve stalled. As we do the work of turning our goals into our plan with the help of our consultant, we’ll add to or change this article with an explanation of our decisions.

And — as always — we want to hear from you. Email us anytime with your questions, feedback, or suggestions.

Ellevest Intentional Impact portfolios are separately managed equity accounts that are sub-advised by Ethic, Inc., an SEC-registered investment advisor. As sub-advisor, Ethic constructs and manages portfolios of individual stock positions benchmarked to an underlying index and customized to specific values criteria. The sub-advisor seeks to track the performance of a designated equity benchmark (domestic and / or international) while outperforming on impact across key sustainability criteria as defined by Ellevest and / or the client.

The minimum investment in Ellevest Intentional Impact Portfolio is $250,000. In addition to Ellevest’s advisory fee, the client will pay 0.30% of assets managed to the sub-advisor.

The Ellevest Intentional Impact portfolios uses the divestment recommendations created by the American Friends Service Committee to identify and screen out companies for practices around the private prison ecosystem. Those recommendations are based on an assessment of three criteria: the salience of the human rights violation, the company's responsibility for the violation, and the company's responsiveness to stakeholders’ concerns about the violation.

FYI, here's the fine print on how the portfolios work.

Account Requirements

Ellevest Digital doesn’t require you to maintain a minimum account balance. However, there are portfolio-specific minimums (ranging from $1 to approximately $240). You may not receive the entire recommended portfolio until your account balance meets the respective portfolio minimum.

Rebalancing and Ongoing Management Ellevest will not rebalance a portfolio until it meets the respective account balance minimum necessary to generate the required shares. This minimum is a function of portfolio allocation and the share price of individual holdings, which will vary.


Disclosures

© 2020 Ellevest, Inc. All Rights Reserved.

*Ellevest Intentional Impact portfolios are separately managed equity accounts that are sub-advised by Ethic, Inc., an SEC-registered investment advisor. As sub-advisor, Ethic constructs and manages portfolios of individual stock positions benchmarked to an underlying index and customized to specific values criteria. The sub-advisor seeks to track the performance of a designated equity benchmark (domestic and / or international) while outperforming on impact across key sustainability criteria as defined by Ellevest and / or the client.

A firm reporting that more than 5% of their revenues are from firearm sales will be screened out. Note that not all companies report their revenues from gun sales, so we can’t guarantee that you will be fully divested from firearms.

**The Ellevest Intentional Impact portfolios uses the divestment recommendations created by the American Friends Service Committee to identify and screen out companies for practices around the private prison ecosystem. Those recommendations are based on an assessment of three criteria: the salience of the human rights violation, the company's responsibility for the violation, and the company's responsiveness to stakeholders’ concerns about the violation.

****The tracking error of Ellevest Intentional Impact Portfolios before the update, as of 7/8/20: 1.36%. Tracking error of the enhanced strategy: 1.37%. The tracking error relates how well a portfolio's performance aligns to the underlying benchmark performance.

Ellevest Intentional Impact portfolios are expected to comprise around 300 US-listed equities (including ADRs as applicable) chosen through an outsourced multi-factor optimization software and sustainability data science developed by Ethic to minimize tracking error.

The sustainability criteria is based on risks in the following categories: Ethics and Fraud, Firearms, Excessive Remuneration, Exploitative Products, Greenhouse Gas Emissions, Human Rights and Community (including private prisons), Labor Relations, Product Quality and Safety, War, Waste, Water, Working Conditions, and Workplace Diversity (including gender metrics on low employee representation, low management representation, and low board representation).

The primary benefit of Ellevest Intentional Impact portfolio is that it provides broad market exposure with a goal of keeping average tracking error low over the long term, less than 1.50%, while divesting from companies that do not meet the strategy’s sustainability parameters. The tracking error may be meaningfully higher if the equity allocation is transitioned over time due to tax or other considerations.

Some of the key risks for investing in an Ellevest Intentional Impact portfolio include:

Market Risk
As with all publicly traded securities, the SMA is exposed to market risk, the risk of losses arising from fluctuations in market prices caused by factors independent of a security’s particular underlying circumstances.

Active Risk
Although the SMA is constructed to minimize tracking error relative to its benchmark, there is no assurance that the strategy will generate market returns within the estimated tracking error. Because the SMA is designed to capture investment returns associated with gender diversity, and high environmental and governance standards, the SMA may exclude, overweight, or underweight individual companies and/or sectors of the market. As a result, the SMA will not fully participate in the market returns of a general investment strategy. The SMA may over or under perform a general market strategy.

Sub-Advisor Risk
The success of an account’s investment through sub-advisors is subject to a variety of risks, including those related to the quality of the management of the sub-advisor and the ability of such management to develop and maintain a successful business enterprise, and the ability of the sub-advisor to successfully execute, operate, and manage the intended strategy at or below the target tracking error.

Business Risk
The fund’s strategy relies on key personnel, their expertise, relationships and networks. A loss of one or more key personnel may adversely impact the strategy.

Ellevest Intentional Impact portfolios give clients access to broad equity market exposure. The target tracking error for the portfolios is under 1.50%. Reporting on Ellevest Intentional Impact portfolios will be provided to clients no less than annually.

The minimum investment in Ellevest Intentional Impact Portfolio is $250,000. In addition to Ellevest’s advisory fee, the client will pay 0.30% of assets managed to the sub-advisor.

All opinions and views expressed by Ellevest are current as of the date of this writing, for informational purposes only, and do not constitute or imply an endorsement of any third party’s products or services.

The information provided should not be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice.

The information provided does not take into account the specific objectives, financial situation or particular needs of any specific person.

Diversification does not ensure a profit or protect against a loss in a declining market. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income.

Investing entails risk, including the possible loss of principal, and there is no assurance that the investment will provide positive performance over any period of time.

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Ellevest Team

The Ellevest team is working to help women reach their financial and professional goals.