An exchange-traded fund (ETF) that excludes investments in companies focusing on diversity, such as preferences for people of color, sexual minorities, and gender equality, will be launched in the United States. Analysts say that the financial investment atmosphere is also changing with the advent of the Trump 2.0 era.
According to major foreign media, the U.S.-based new asset management firm Azoria announced on the 5th (local time) that it will launch the ‘S&P Meritocracy ETF (ticker SPXM)’ early next year. This is a so-called 'anti-woke' ETF. It serves as a kind of warning to companies promoting diversity policies.
CEO James Fishback explained at an investment briefing held at Mar-a-Lago Resort in Florida, the residence of President-elect Trump, “We will invest excluding dozens of S&P 500 companies that focus on DEI (diversity, equity, and inclusion) policies when hiring employees.” He added, “Whether Americans voted for Trump or not, they do not want to invest in companies conducting woke experiments,” and pointed out that the returns of companies emphasizing DEI have been lower than the average of the S&P 500 index in recent years.
The background for the launch of the anti-woke ETF is the election victory of Donald Trump, a Republican, as the President of the United States. President-elect Trump has argued that the diversity values such as DEI, PC (political correctness), and woke, emphasized by the Joe Biden administration, cause another form of discrimination and rather promote division.
Foreign media expect Starbucks to be the first target of this ETF. This is because Starbucks announced in October 2020, near the end of the first Trump administration, a goal to have 30% of its employees be people of color, including Black individuals, by 2025. However, Starbucks responded to related foreign media inquiries seemingly mindful of the second Trump administration, stating, “That was an aspiration, not a quota obligation, and it has recently expired and been discarded.”
As investment pressure on companies emphasizing diversity is expected to increase, many companies are likely to significantly revise related policies. For example, the largest U.S. retailer Walmart announced at the end of last month that it will not consider racial or gender differences in supplier contracts.
The anti-woke ETF borrows from ESG (environmental, social, and governance) funds, which rapidly increased under the Biden administration. ESG funds exclude investments in industries causing environmental pollution. However, their returns were not good. According to Morningstar, the average return of 223 ESG funds so far this year is 10.7%, far behind the S&P 500 index increase of 28% during the same period.
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