One of the benefits of the environmental, social, and governance (ESG) investing movement is that more investors, including professionals, are paying attention to companies’ gender diversification at the highest levels.
In fact, that point of emphasis is fueling the evolution of gender lens investing. Some exchange traded funds make it easy for investors to get involved, including the SSGA Gender Diversity Index ETF (SHE).
SHE, which tracks the SSGA Gender Diversity Index, focuses on companies that score well in terms of gender diversity in senior leadership roles relative to competitors in the same sector. The ETF doesn’t require that high-ranking women at such corporations occupy the role of chief executive officer. Indeed, there’s work to be done regarding elevating more women to the CEO spot in publicly traded companies.
“Women still hold a disproportionately small number of CEO roles among U.S. companies. How small? Only 8% of the companies on Morningstar’s inaugural list of the best companies to own are led by female CEO,” noted Morningstar’s Susan Dziubinski.
For long-term investors, SHE could be a compelling alternative or complement to core equity exposures because various studies suggest that companies that score well in terms of gender diversification outperform less diverse rivals. However, that shouldn’t be the sole determinant in getting involved with the ETF.
“Of course, buying a stock simply because the company’s CEO is a woman doesn’t make any more investment sense than buying a stock simply because the company’s CEO is a man,” added Dziubinski. “Instead, you want to examine fundamentals, consider valuation, and apply whatever other investment metrics matter to you before buying. Moreover, CEOs come and go. That woman-led company may be managed by a man—and vice versa—soon enough.”
Again, the number of public companies currently led by female CEOs is small, but the group is home to some venerable names, including some that are among SHE’s 204 holdings. Those that Morningstar Economic Moat Ratings found on the firm’s list of best women-led firms to own that are also SHE components are defense giant Northrup Grumman (NYSE:NOC) and Yum China Holdings (NASDAQ:YUMC).
SHE’s top 10 holdings include Dow Jones Industrial Average members UnitedHealth (NYSE:UNH), Visa (NYSE:V), and Walt Disney (NYSE:DIS), among others.
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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.