Thematic Equity Investing: Gender equality

Last week world leaders, including political leaders, executives and other stakeholders, gathered in Paris to attend the Generation Equality Forum convened by U.N. Women—an organization formed by the UN in 2010 to work for the elimination of discrimination against women and girls, empowerment of women, and achievement of equality between women and men as partners and beneficiaries of development, human rights, humanitarian action and peace and security. Together, this group, which has not gathered together since the 1995 Beijing World Conference on Women, unveiled a total commitment of $40 billion to advance gender equality. This is reportedly the largest dollar amount ever dedicated to the issue. The funding will go toward instituting hundreds of new gender-focused policy proposals on issues including gender-based violence, which spiked globally during the coronavirus pandemic, economic empowerment and access to reproductive health services. The $40 billion was pledged by various stakeholders, including a $2.1 billion commitment by the Bill and Melinda Gates Foundation to be spent over the next five years on health and family planning programs, economic empowerment projects and other initiatives. This largest-ever single commitment was among other pledges that came from foundations, including the Ford Foundation and the George Soros-funded Open Society Foundation and PayPal that each pledged more than $100 million.

Not everyone is in a position to make such pledges, however, investors with a preference for advancing gender equality can take another tact, by allocating a percentage of their portfolio assets in mutual funds or ETFs that invest in securities of issuers that demonstrate a commitment to advancing and empowering women through gender diversity on their boards, in management and through other policies and programs. In a similar fashion, these investment vehicles represent an option for sustainable investors wishing to align their investments with the UN Sustainable Development Goals (SDGs) and in particular SDG Number 5 that seeks to achieve gender equality and empower all women and girls.

At least six thematic funds, with total net assets of $1.3 billion as of May 31, 2021 are available for consideration by investors. Refer to Table 1. These funds include three ETFs and three mutual funds managed by Fidelity Management and Research Company, Glenmede Investment Management, Impact Shares Corp., Impax Asset Management and State Street Global Advisors. Three of these are passively managed while three of the six invest in US as well as non-U.S. securities. While individual strategies vary, the funds tend to concentrate in similar sectors, the largest of which are technology, financial services and consumer services or healthcare. The top pick SPDR SSGA Gender Diversity ETF, for example, allocates 53% of portfolio assets to the following three sectors: 21.7% to financial services companies, 17.9% to technology companies and 13.3% to companies in the health care sector. Top securities holdings include PayPal Holdings, Inc., Texas Instruments, Inc., Visa, Inc., The Walt Disney Company and Johnson and Johnson, Inc. Performance results over the twelve months ended May 2021 were generally strong, averaging 44.5% versus 40.3% recorded by the S&P 500 and 41.85% achieved by the MSCI ACWI Index (Net), with only one fund (two share classes) lagging their broad designated benchmarks. Refer to Table 2 and Chart 1. At the same time, intermediate to-long-term performance results, while limited as only three of six funds that have been in operation for 3 years or more, lack distinction as they fall just short of their benchmarks.