Ethic raises $6.8 million in funding

Ethic founders from left: Jay Lipman, Doug Scott, Johny
Mair
Ethic

• New York-based sustainable investing startup Ethic has
  raised $6.8 million in its latest funding round.
• Backers include impact investor Justin Rockefeller and
  venture capital firms led by former Barclays Global Investors
  CEO Blake Grossman and ex-Visa president Hans Morris.

Sustainable investing is a big business, and it’s only getting
bigger. JPMorgan values the socially responsible investing market
at almost $23 trillion, according to an April
report, with US assets in particular up 200% over the
last decade. 

One New York-based startup is tapping into this trend, trying to
bridge the gap between investors and the ever-increasing world of
sustainable-focused products. Ethic, founded in 2015, works to
create investing portfolios that can be customized for
individuals and institutions.

On Tuesday, the startup announced it raised $6.8 million in
its first funding round.

Ethic received backing from impact investor Justin Rockefeller
and venture capital firms run by former BlackRock vice chairman
and ex-Barclays Global Investors CEO Blake Grossman and ex-Visa
president Hans Morris, among others. 

“This is a fascinating area of asset management, since literally
every asset manager, wealth manager, family office and endowment
is talking about their ESG strategy,” Morris, now the managing
partner of venture firm Nyca Partners, told Business Insider.
“How it evolves is still unclear, but we think the focus and
capabilities of Ethic can provide the essential tools for all
firms as they sort this out.”

Investments focusing on ESG – environmental, social and
governance factors – have become more popular for both
institutional and retail investors, as both groups increasingly
prioritize social good and positive returns. From 2014 to 2016,
the US saw a 32.7% increase in socially responsible investments
which assets topping $8.7 trillion, according to the Global
Sustainable Investment Alliance’s
biannual report.  

Ethic was the first investment out of New York-based Nyca
Partners’ third venture capital fund, and its first investment in
the company. Other venture capital firms in this funding round
included Grossman’s ThirdStream Partners, Kapor Capital and the
Urban Innovation Fund.

Besides Ethic, there are dozens of other asset management firms
focused on socially responsible investments. But Nyca Partners’
Morris said Ethic stood out because of the team’s capabilities
and experience; its focus on institutional distribution; its
customizable ESG dashboard; and the technology behind portfolio
construction, tax efficiency, testing and analytics. 

Ethic’s funding round sits between seed funding and Series A,
co-founder Johny Mair told Business Insider. He and his other
co-founders, Doug Scott and Jay Lipman, all previously worked for
Deutsche Bank, among other institutions, in various roles. 

“What we recognized was when it comes to people’s values, what
people want varies hugely,” Mair said in an interview, noting
that Ethic’s approach to sustainable investing could include
screening for environmental impact, labor rights, gender and
ethnic issues and other factors.

Ethic’s team works with financial advisors and institutions,
including foundations and endowments, to create a suite of
equities packaged in separately-managed accounts. Advisors’
clients can then invest in a firm-wide product or customize a
specific strategy. The firm declined to name any clients, citing
compliance concerns. 

Mair anticipates future demand from large, nationwide
organizations struggling with client retention after generational
wealth transfers, as clients leave to seek more customized,
sustainable investments.

The latest round of funding will help Ethic scale its technology
and service increasing client demands, Mair said.