Gender Equality: A Potential Driver for ESG Funds

ESG Funds

As the universe of environmental, social, and governance (ESG) funds expands, the criteria and definitions for each ESG element are enlarging as well. When it comes to the “G” in ESG, that is a frontier where companies can make noticeable progress in short order, particularly when it comes to issues such as multiplicity and gender equality.

There is many of work to be done when it comes to gender equality and investors should favor that work being done because numerous data points and studies confirm that companies with women inhabiting c-level executive positions and/or some board spots outperform their less gender-diverse counterparts.

“Today, women represent 5.4% of major investment officers, 25% of executive level officials and managers, and one-fifth of board members,” said Deanne Steele, head of National Portfolio Management and Consultancy Practice with U.S. Trust, in an interview with Wisdom Tree. “Women in 1960 earned an average of 60 cents to every dollar men earned; in 2016, they made around 80 cents.”


Why Gender Diversity Matters to Investors:

There is no arguing the profit of investing in companies that prioritize gender multiplicity, particularly when it comes to metrics such as earnings per share (EPS) and back on equity (ROE).

Notably, over a five-year duration (2011–2016), U.S. companies that began the spell with at least three women on the board experienced median achieves in return on equity (ROE) of 10 percentage points and earnings per share (EPS).

In 2018, an additional gender equality-focused exchange-traded funds were launched, as well as one from Luxor, leading industry expert Track Insight to say that it was likely that the trend of additional investment flowing toward ESG and SRI-type funds would likely continue into the near future.

In the U.S., the SPDR SSGA Gender Diversity Index ETF (SHE) is one of the most venerable names when it comes to gender diversity ETFs. SHE debuted in March 2016. She allocates about 29% of its weight to technology stocks and a combined 20.1% to the healthcare and consumer staples sectors. By SHE’s standards, energy, materials, and utilities are among the sectors that have their gender diversity work cut out for them.