What to know about investing in companies that empower women

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As women in America struggle to get equal pay and rise up the ladder, companies that empower and promote female workers are being rewarded by impact investors.

Known as gender lens or gender equity investing, the idea is to invest for financial return, while promoting gender diversity. The theme is becoming more popular — although it still represents a small slice of the investment pie, according to Morningstar.

Assets in U.S. gender equity funds have doubled over the trailing three years to $1.3 billion, as of the end of February, Morningstar found. Yet those funds represent less than 0.01% of total equity fund assets in the United States, according to the firm.

Funds focusing on gender equality

Ticker Name Fund size ($) Expense Ratio YTD total return 3-year average annual total return
FWOZXFidelity Advisor Women’s Leadership Z131,202,1450.69%3.24%19.83%
SHESPDR MSCI USA Gender Diversity ETF195,412,4500.20%2.09%14.68%
FDWMFidelity Women’s Leadership ETF4,924,8810.59%3.37%N/A
PXWEXImpax Ellevate Global Women’s Ldr Inv805,158,9280.76%2.35%14.44%
GWILXGlenmede Women in Leadership US Eq21,070,9970.85%1.40%19.70%
WCEOHypatia Women CEO ETF1,563,2670.85%N/AN/A
EQULIQ Engender Equality ETF5,388,0050.45%0.37%N/A
WOMNImpact Shares YWCA Women’s Empwrmt ETF33,829,4480.75%3.49%24.42%
FWOAXFidelity Advisor Women’s Leadership A131,202,1451.10%3.10%19.34%

Source: Morningstar

But what exactly qualifies as gender lens investing, does it correlate to returns and can it make an impact?

‘Isolate that female factor, there will be alpha.’

Hypatia Women CEO ETF’s top holdings

Ticker Name % of net assets
OISOil States International2.11
INSWInternational Seaways2.08
OXYOccidental Petroleum2.08
JXNJackson Financial1.22
PGRProgressive Corp.1.21
LBCLuther Burbank Corp1.21
GBXGreenbrier Cos1.21
BXMTBlackstone Mortgage Trust1.20
BENFranklin Resources1.20
EGBNEagle Bancorp1.18

Source: Hypathia Capital, as of 3/1/2023

Tracking the gender theme

Yet gender lens investing can be more than just investing in companies with female chief executives.

Funds may screen for a percentage of women on the board of directors and women in executive management roles, said Kenneth Lamont, senior researcher at Morningstar. They may also look at hiring, retention and promotion figures for women within a given company and gender pay gap data, if available.

“Every provider is going to give you a slightly different approach,” he said. “There is no absolute correct approach to tracking the gender theme.”

Some providers use research from data provider Equileap, which focuses on gender equality, to help determine holdings. The Amsterdam-based firm researches and ranks 4,000 public companies around the globe using 19 criteria, including the gender balance of the workforce, as well as pay gaps, career training, recruitment and female-friendly policies.

Women in leadership matters, but we need a more robust scorecard to assess gender equity.

Julia Fish

vice president at Glenmede

Glenmede Women in Leadership’s top holdings

Ticker Name % of net assets
MPCMarathon Petroleum2.82
DGXQuest Diagnostics2.81
IPGInterpublic Group of Companies2.78
MRKMerck & Co.2.49
ULTAUlta Beauty2.45
GDGeneral Dynamics2.38
BKNGBooking Holdings2.37

Source: Glenmede, as of 12/31/2022

Glenmede Investment Management analyzed Equileap data and found on a sector-neutral basis, companies in the top quintile of gender balance in leadership and workforce experienced an average greater return and less risk than companies in the bottom quintile.

Yet those extra metrics on gender equity matter. Those in the top quintile of other proxies for gender equity — including pay equity, training and career development, access to benefits and diverse supply chains — also experienced greater returns and lower risk than the bottom quintile, the firm found.

Making an impact

The people who run these funds believe the investments can make an impact.

“What investors should also look for is the existence of shareholder engagement within these public market strategies — so the ability of a public market investor to use their shares to ask the company to go farther across environmental, social and governance features, but especially on gender-related issues,” Fish said.

It’s something activist investors have been doing, to some success. In 2018, Citigroup became the first big U.S. bank to agree to publish statistically adjusted equal pay for equal work numbers after Arjuna Capital’s Natasha Lamb pushed for it. The result was an increase in compensation for women and minority workers to bridge the gap.

For New York Life Investments, putting money toward fixing the gender gap is part of its mission. The firm’s IQ Engender Equality ETF (EQUL) donates a percentage of its management fee to Girls Who Code, a nonprofit that aims to boost the number of women in computer science. The fund is just over a year old, so while it grows assets, it is also augmenting its donations to the organization with additional contributions, said Wendy Wong, head of sustainable investment partnerships at New York Life Investments. EQUL has an expense ratio of 0.45%.

“They are trying to close the gender gap in technology. The pipeline isn’t growing as much as it should,” Wong said. “By not having a pipeline of women going into technology, that has really broad implications across everything.”

Don’t forget fundamentals

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