ETF Providers Are Making Social Responsibility a Greater Focus

Exchange traded fund sponsors are receiving high scores on diversity, equity, and inclusion, along with showing greater initiative in environmental, social, and governance issues.

There has been an increased emphasis on social issues, like pay equity and racial and gender representation within corporations, which helped Sage Advisory Services include a new section in its annual survey of ETF sponsors. According to Sage Advisory Service’s Fourth Annual Sage ETF Stewardship Survey, among large and small ETF sponsors, almost 90% of respondents received the highest possible score in the newly added section focused on diversity, equity, and inclusion.

“We added a diversity, equity, and inclusion section not only to ensure our ETF sponsors are set up to foster diversity, equity, and inclusion but also to verify they have strategies in place to improve upon areas in which they may be lagging,” says Robert (Bob) G. Smith, CIO, and president of Sage Advisory Services, said in a note. “We are happy to report that 88% of our ETF sponsors received the highest possible score on this section. Clearly, there is more proactive work to be done in this area, and we are encouraged that the vast majority of ETF sponsors recognize the importance this plays in creating a thriving, successful workforce.”

Smith also added that 94% of those surveyed showed they have resources to promote equity at all levels.

“Many of them cited programs and initiatives, including recruiting initiatives, reviewing promotions, diversity focus groups, and mentorship programs,” Smith said.

The survey revealed that the number of respondents receiving a passing grade in the voting practices, a key component in stewardship, rose to 71% in 2021 from 64% in 2020.

“We believe good stewardship practices and ESG principles are closely linked because they promote greater transparency and accountability,” Emma Harper, an environmental, social, and corporate governance (ESG) research analyst at Sage and survey author, said in the note. “Good stewardship also fosters a culture of responsibility, and it seeks the alignment of stakeholder interests to secure and increase long-term capital value.”

More ETF Sponsors have been putting greater effort in supporting environmental, social, and governance issues, which has been reflected by their voting records.

“Many ETF sponsors specifically focused on their voting records and showcased their commitment to supporting proposals that had a positive impact on ESG factors,” Harper added. “This was especially notable with climate voting proposals.”

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