Where Gender Diversity Matters | ETF Trends

In the quest for gender diversity, many companies aim to appoint more women to their boards of directors, but there’s more to the story, and investors should be aware of the point that while more women on boards represents progress, it is also important to see more women in management roles.

That’s particularly true in the wake of the coronavirus pandemic, which some experts say is a headwind for female labor market participation.

“While the pandemic had a detrimental impact on labor force participation across the board, female workforce participation was impacted more severely, falling 4% relative to 3% for males on a global basis between 2019 and 2020. As of 2022, global female workforce participation is 46.6%, which materially lags male workforce participation of 72.0%,” according to Morningstar.

Investors looking for a way to play the theme of more women stepping into management roles might want to consider the SPDR SSGA Gender Diversity Index ETF (SHE). SHE, which turned six years old last month, follows the SSGA Gender Diversity Index.

That benchmark doesn’t focus on companies with women on their boards. Rather, the benchmark’s member firms “demonstrate greater gender diversity within senior leadership than other firms in their sector,” according to State Street.

SHE’s structure could prove beneficial to investors over the long haul because data indicate that more women in management positions is more important than how many occupy board seats.

“Our research indicates that the number of women in senior management matters more. Companies with greater parity between the percentage of women in senior management and the percentage of women in the rank and file achieve lower employee turnover,” adds Morningstar. “In practice, the data suggest that if employees see equal representation in leadership roles and opportunities for career progression, they are more likely to stay with a company longer.”

The Morningstar research indicates that biotechnology and managed care are among the industries with strong representation of women in management roles. On that note, healthcare is SHE’s second-largest sector allocation at 15.67%, trailing only tech.

Indeed, SHE is a long-term idea because there’s much work to be done in terms of elevating women to marquee roles within companies.

“While we observe progress, it is important to mention that the average percentage of women in the workforce within the Sustainalytics universe in 2020 stood at roughly 36%, and senior management was even lower at an average 24%,” concludes Morningstar.

For more news, information, and strategy, visit the ESG Channel.

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.