A growing wave of investors want to put their money where their morals are. And in the so-called “Year of the Woman”—christened as such because of the impact of the #MeToo movement and record gains by female candidates in the US midterm elections—there are more opportunities to use finance as a tool to promote gender equality.
The latest is by the nonprofit organization As You Sow, based in Oakland, California, which has created an online screening tool that anyone can use for free to find out how a given mutual fund scores on the issue of gender equality. The tool analyzes the companies held inside more than 5,000 popular funds in the US against 12 metrics created by Equileap, the foremost organization providing data on gender equality in the corporate sector. (Equileap’s rankings of companies are also behind popular gender equality exchange-traded funds.)
The 12 metrics measure the gender balance in each company from staff to senior management and board directors, as well as evaluating policies on fair pay, non-discriminatory hiring, workplace safety, and systems for reporting complaints. The As You Sow tool also assesses companies for their commitment to reducing social risks, for example, ensuring that none of the company’s activities support human trafficking.
An estimated 100 million Americans in 56.2 million households owned mutual funds last year, directly or through retirement accounts, according to the Investment Company Institute. The US mutual fund industry has almost $19 trillion in assets, more than half of which are invested in equities. “The new tool empowers investors to see what is hidden within the mutual funds that comprise the bulk of their retirement savings and 401(k) plans,” says Andrew Behar, CEO of As You Sow. “The first step is to know what you own—then you can use the power of your capital to invest in companies that have policies and practices that promote gender equality.”
The aim is for the tool, which launched today, to pressure companies to improve their performance on gender-equality issues and to encourage fund managers to create investment products that highlight companies already leading on this. The tool allows anyone to see alternative funds that score more highly and compare financial returns at the same time. One of the most important consequences of tools like this is that they should encourage companies to be more transparent and provide more data about their policies and practices. A major complaint in the field of sustainable investing, and impediments to its efforts to go mainstream, is that a lack of data makes it difficult to properly assess investment opportunities.
The largest mutual fund in the US, and in the world, is State Street’s SPDR S&P 500 ETF, which tracks the performance of the US’s benchmark stock index. It scores 48 out of 100 points, ranking 1,006th out of 5,196 funds. The company with the highest Equileap score in the fund is Merck & Co, and the lowest is Brighthouse Financial.
Equileap’s assessments are tough, and every company has vast amounts of room to improve. In its latest global annual report, the companies with the highest scores were General Motors and L’Oréal, though each only scored 71 out of 100. As You Sow’s tool also shows how hard it can be to design funds with this social goal in mind. The Pax Ellevate Global Women’s Leadership Funds, socially responsible funds dedicated to gender equality, only score 59. But it also shows which funds only have a light-touch commitment to gender equality, such as State Street’s SHE ETF. Though it was a pioneer in this area, it’s been criticized for focusing on gender diversity on company boards and not looking at equality more deeply. It scored 47. That said, the aforementioned problem of patchy data is likely to impact these rankings and scores.
Of the mutual funds in the online screening tool, the ones with the highest scores are the iShares MSCI Australia ETF, with holdings in Australian banks scoring well, and the iShares MSCI Sweden Capped ETF, with Swedish telecomms companies at the top of the rankings.
As You Sow offers similar tools to assess the exposure of mutual funds to fossil fuels, weapons, deforestation, and tobacco.