The evolution of environmental, social, and governance (ESG) investing is leading to more granular thematic twists, one of which is gender lens investing.
In theory, the concept is easy to understand. Gender lens investing means investing in companies owned and/or run by women, firms prioritizing gender equality in the C-suite and the board, and those developing products and services that improve women’s lives.
However, not all exchange traded funds excel at delivering on the promise and potential of gender investing. One that does is the IQ Engender Equality ETF (EQUL). EQUL follows the Solactive Equileap U.S. Gender Equality Index, and that index is designed to identify companies that emphasize gender equality. Moreover, components in that benchmark score well in terms of compensation equality and gender equality across their respective headcounts. Broadly speaking, EQUL’s methodology is highly pertinent today.
“While hiring more women, especially in positions of real influence, is important, it isn’t enough. In finance and investment, the most powerful approach to achieving parity may be gender lens investing. There are many reasons different firms and businesses might adopt gender lens investing: For example, it can benefit people around the world, help develop new and neglected markets and sectors, and improve the overall quality of life,” according to the CFA Institute.
Another reason EQUL is relevant to socially conscious investors is because it avoids some of the thorny issues associated with this still young investing style. As is the case with ESG and “greenwashing,” there are concerns about “gender washing” in the gender investing space.
“Gender lens investing has a wide range of goals, and individual efforts can focus on specific aspects, regions, and opportunities. But closing the ‘gender gap’ in both the investee firm and the investor’s firm is the primary mission. Gender lens investing approaches diversity from the ground up. It tries to avoid “gender washing,” or bringing in women for appearances’ sake, and seeks to empower them on investment teams and place them in positions of real authority,” adds the CFA Institute.
Home to 73 stocks, none of which exceed a weight of 1.8%, EQUL does offer investors long-term out-performance potential, which is crucial in terms of luring more market participants to this style.
“Gender-balanced investment teams beat expectations by 10% to 20%. The International Finance Corporation found businesses with gender parity in their leadership teams had valuations up to 25% higher than teams with lower gender diversity,” concludes the CFA Institute.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.