Defence stocks are very popular on the markets just now, with an increasing unstable world causing a massive increase in spending on security and defence. More than a few investors, however, are reticent about investing their capital in this sector. The motives for their wariness may be moral concerns, a pacifist stance or religious conviction. That is precisely where the Bountiful Enhancing the Common Good Index comes in. This new stock market barometer has set itself the goal of tracking the US equity market in full alignment with the principles of the common good. The idea comes from Bountiful Financial, a US financial services provider specialising in faith-based investment.
“Love your neighbour as yourself” – from this well-known verse in the Gospel of Matthew Bountiful has derived six principles for the common good:
“Our new index selects companies with a strong positive social and societal commitment,” Bountiful explains. By contrast, it excludes companies whose business activities are harmful for society. This is intended to result in a more ethical and sustainable investment landscape.
The selection universe for the index is the Russell 3000. Companies whose turnover is more than half in line with the principles of the common good are first filtered out of this broad-based US equity benchmark. In the next step, the managers sort out shares from the gambling, tobacco, civilian firearms and recreational cannabis sectors. This is followed by a further belief-based screening. This eliminates companies that violate the United Nations' principles for sustainable business practices. The same applies to companies that do not comply with the OECD guidelines on controversial weapons and opioids. In addition to these qualitative criteria, the index methodology stipulates a market capitalization of at least USD 2 billion. Of all the companies that make it through this grid, between 30 and 50 are included. The weighting of a share is limited to 5%, and a sector can contribute a maximum of 40% to the index.
The Bountiful Enhancing the Common Good Index contains 41 companies. Consumer stocks are at the cap limit of 40%, while healthcare comprises 28.2%. Industrials are also weighted relatively highly, accounting for just under 23%. It is noticeable that the index is dominated by small and mid caps. A number of Wall Street heavyweights fail the selection process because they have connections with the production of opioids. This exclusion criterion has led to the exclusion of supermarket giant Walmart and pharmaceuticals group Johnson & Johnson, among others. When it comes to performance, the faith-based approach has nothing to be ashamed of: backtesting shows that the Bountiful Enhancing the Common Good Index was able to keep pace with the benchmark (US large caps) between the end of 2013 and the end of 2024.
Leonteq enables investment in this unique and innovative stock market barometer, listing ETP+ products on the Bountiful Enhancing the Common Good US NTR Index on both the SIX Swiss Exchange and the BX Swiss. One of the strengths of this issue, alongside its daily liquidity, is the robust product structure. ETP+s are collateralised by means of a special mechanism in which a deposit is pledged with SIX SIS AG for each product. This collateralisation is monitored by SIX Repo AG on an ongoing basis. Should Leonteq enter into payment difficulties (default), SIX Repo AG could realise the pledge in favour of the product owners. The USD-denominated ETP+s track not only the performance of the underlying, but also the dividends, with payouts of the companies included in the index being reinvested net. The management fee is 0.75% a year. For this modest contribution investors can add to their portfolio a quintessential element of the US equity market that aligns with the strict principles of the common good. At a time of geopolitical tension, global arms races and omnipresent hate speech, such an alternative can surely do no harm.
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