More Women in the Boardroom Equals a Better Business; EQUL Invests

The most recent corporate gender diversity survey by Moody’s Investors Service found that 29% of corporate board seats in North American and Europe were held by women in 2022, a 5% increase over two years ago, reported CNBC. In America, women occupy 27% of board seats, up from 22% in 2020.

The benefits of having greater gender diversity has been linked to better credit ratings for companies and better performance with higher returns. Companies that lack gender diversity at the board level typically tend to underperform, the survey found.

“We consider the presence of women on boards – and the diversity of opinion they bring – as being supportive of good corporate governance, which is positive for credit quality,” the ratings agency said.

Between government mandates, diversity requirements from exchanges such as Nasdaq, and pressure from institutional investors, the tide is slowly turning in favor of broader representation at the board level.

Investing in Gender Diversity with EQUL

For investors that seek to capture the potential higher performance offered by more diverse companies, the IQ Engender Equality ETF (EQUL) offers a dual impact opportunity for investors. The fund is one that seeks to invest in companies with a gender balance within their workforce, board of directors, and senior management and evaluates the gender pay gap of companies, their sexual harassment policies, parental leave, and other metrics.

The fund is also an impact fund. It was created in alignment with Girls Who Code, a nonprofit organization that seeks to increase the representation of women in computer science by offering clubs and programs for any and all girls, half of which constitute historically underrepresented groups. IndexIQ donates a portion of its management fee to Girls who Code.

EQUL seeks to track the Solactive Equileap US Select Gender Equality Index which includes U.S. companies of any market cap and includes the 75 highest scoring companies. Companies are assigned an Equileap score that is 40% based on gender balance in the workforce and leadership, 30% on equal compensation and work/life balance, 20% on its gender policies, and 10% on its transparency, accountability, and commitment.

The index excludes companies that take certain percentages of their revenue from unconventional fossil fuels, nuclear energy, controversial businesses (gambling, adult entertainment, alcoholic beverages, tobacco products, cannabis, and military equipment), controversial weapons (anti-personnel mines, biological and chemical weapons, cluster munitions, depleted uranium, and nuclear weapons), or companies that infringe or violate established international initiatives and guidelines.

Companies are also excluded from the index for a year if any time in the previous two years they have engaged in unethical practices that involved discrimination of any sort against their employees.

EQUL carries an expense ratio of 0.45%.

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