One of the derivative effects of an increasing emphasis on the “S” and “G” in environmental, social, and governance (ESG) investing is increasing emphasis and focus on gender equality.
In fact, the notion of gender equality being an integral component in bolstering the foundations of social and governance principles led to gender investing becoming a category unto itself. Not surprisingly, that spawned the creation of some dedicated exchange traded funds, including the SPDR SSGA Gender Diversity Index ETF (SHE), among others.
SHE is more than six years old, making it a seasoned veteran among gender investing ETFs. Better still, the fund is more relevant today than when it debuted, and that relevance is increasing.
“According to a recent survey from Morgan Stanley Wealth Management, high-net-worth investors said it is important that companies they invest in have policies in place to promote diversity, equity and inclusion (67%), hire and promote employees of diverse backgrounds (66%) and have people of diverse backgrounds in leadership positions (63%),” said the investment bank.
SHE follows the SSGA Gender Diversity Index. That gauge employs a simple tactic: an emphasis on companies within the various GICS sectors exhibiting notable gender diversity in their top ranks. That methodology is notable for a couple of reasons.
First, at a time when there’s growing scrutiny on the complexity of ESG ETFs, SHE’s simplicity stands out. Second, scores of data points and research support the notion that public companies that are more gender diverse outperform rivals that are lacking that diversification.
“According to Morgan Stanley Research from 2019, a more diverse workforce, as represented by women across all levels of the organization, is correlated with higher average returns. When our quantitative team analyzed global companies based on their percentage of female employees and other metrics of gender diversity, companies that have taken a holistic approach toward equal representation have outperformed their less diverse peers by 3.1% per year,” added the bank.
Moreover, gender investing works over the long term. As Morgan Stanley points out, from 2011 through 2019, more gender-diverse companies beat their rivals in terms of equity market performance.
More gender-diverse companies enjoy benefits such as superior talent retention, better exchange of ideas from different perspectives, more innovation, and less reputational risk.
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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.