Startup Stories: Ethical Investing in Emerging Markets
A conversation with Justin Bernier ’20 who, with four EMBA classmates, launched an index fund that lets Americans invest in emerging markets without supporting companies that threaten U.S. national security.
In this series, Karen Guzman talks to student and alumni entrepreneurs about how they are making an impact with their startups.
Founders: Justin Bernier, Todd Jorgenson, J. R. Lanis, Jason Mangus, and Amit Sengupta, all 2020 graduates of the MBA for Executives program.
Venture: With a founding team that includes four military veterans, the National Security Index (ticker: NSI) owns and operates the National Security Emerging Markets Index ETF. NSI allows American investors to invest in developing economies without harming U.S. national security and human rights interests by excluding “bad actor” companies, such as the hostile defense contractors and human rights violators sometimes found in large emerging markets index funds.
What was the moment when you had the idea for this startup?
During our time at Yale, a Congressional committee was debating a BlackRock plan to include emerging-market stocks in the Thrift Savings Program, which is the U.S. government’s defined contribution plan for both civilian and military personnel. The problem was that BlackRock had proposed an index that included Chinese defense firms, human rights offenders, and other sanctioned companies. We realized that investors needed a more responsible way to access emerging markets.
What’s the problem you’re trying to solve or the gap that you’re trying to fill?
Emerging markets are an increasingly important asset class for global investors seeking growth and diversification, but too many index fund managers don’t screen out national security threats that put American troops at risk. They also turn a blind eye to known human rights violators, especially companies sanctioned under the Uyghur Forced Labor Prevention Act. The big Wall Street firms won’t solve this problem themselves because they have business partnerships with government-controlled banks in China. NSI has no such conflicts of interest.
What was the most important resource Yale SOM contributed to your startup?
The obvious answer is the people; our partnership includes five SOM 2020 graduates who probably wouldn’t have met but for Yale. Also important is what I’d call an encouraging but realistic spirit of entrepreneurship. The SOM faculty doesn’t sugarcoat the difficulty of launching a successful startup.
What’s the biggest milestone your startup has hit since graduation?
We rang the Nasdaq opening bell on April 10 in the heart of Times Square. The event was an occasion for our team and family members to celebrate NSI’s launch. Ringing the bell was also a reminder that we have much work ahead of us to ensure the fund’s success and growth.
