Investor focus on social issues set to encourage gender equality progress

An increased focus on the ‘S’ or social pillar of ESG by investors and regulators should lead to greater scrutiny of companies’ gender equality progress and encourage better data transparency in this area.

This was one of several conclusions reached in a recent interview on gender equality data featuring Francois Millet, Head of climate and thematic business development at Amundi ETF, Indexing and Smart Beta and Diana van Maasdijk, co-founder & CEO of Equileap, an ESG data provider specialising in gender data.

According to Millet, momentum is now growing behind improved disclosure of social criteria, including gender equality. 

“We have seen a massive conversion of assets to ESG strategies over the last five years and a lot to environmental strategies, especially over the last two years. Social issues and the main component of the social ranking of companies, which is the management of human capital, have not been ignored, but insufficiently addressed.” he added. 

“When you look at the ESG rating of a company, the social pillar is actually number one, so it is generally more heavily weighted than the environmental and governance pillars, at typically 35%-45% of the global weighting. More than half of that is the management of human capital, the rest being the impact of products on social issues.”
​​​​​​​
“This situation is changing under the impetus of regulation, particularly in the European Union, which is pushing investment managers and distributors to improve disclosure on a number of criteria, including gender equality. They also need to test suitability for clients in terms of ESG preferences based on many criteria, including dealing with human capital and gender equality. Companies too will be submitted, through new corporate sustainability reporting directives, to the same sorts of obligations. We are confident this will grow in terms of momentum.”

Francois Millet

Head of climate and thematic business development at Amundi ETF, Indexing and Smart Beta

Diana van Maasdijk emphasised there is still a serious problem to address in terms of global gender equality but tackling this challenge can bring change and positive impact for everyone, not just women in the economy.

“The reason data is important is that it can be used by responsible investors who care about ESG to add a gender lens and choose companies that are doing better on gender equality,” she said. “This is an opportunity as what we have seen from our data, is those companies that have better gender equality scores also have better financial performance and lower volatility.” 
​​​​​​​
“We have a problem and we still need to close the gender equality gap but with the data, we get transparency, and that data can be used for products which are good, not only for the world, but also for your wallet.”

Diana van Maasdijk 

Co-founder & CEO of Equileap

Data gathering and challenges

In relation to gathering gender equality data, Van Maasdijk said progress has been made in recent years but there are still challenges to be addressed. Equileap currently analyses a universe of approximately 4,000 publicly-listed companies with a market cap of $2bn or above, listed in any one of 23 developed economies1 . It approaches companies for data they have published themselves, and then gathers data points using its proprietary Global Gender Equality Scorecard for each group. 
The Scorecard incorporates 19 data points, including the gender balance, at all different levels of the company, gender pay gap information, and policies including parental leave and flexible working. It also includes supplier diversity policies, so whether a company supplies from women-owned companies and if they have safety in their supply chains. Companies then get a chance to validate the data collected. 
Van Maasdijk said the biggest challenge they have faced is the lack of corporate transparency in many areas where they would like to see published data. For example, only 17% of the 4,000 companies they analyse publish their gender pay gap figures.   

“There are some companies that don't publish the percentages of men and women at workforce level, let alone at management level.” she added.

However, she said that Equileap pushes for change by enforcing transparency as a measure for moving forwards if companies want to see their gender equality scores improve and this has led to major improvements since Equileap began licensing its data in 2017. 

Utilising gender equality data

Amundi ETF has used Equileap’s gender equality data to construct its Gender Equality ETF, which launched in 2017 and is classified as an Article 8 fund, according to the EU SFDR regulation2.

The Lyxor Global Gender Equality (DR) UCITS ETF – Acc provides exposure to the top 150 companies based on Equileap’s Gender Equality Scorecard. It tracks the Solactive Equileap Global Gender Equality Net Total Return Index which applies an ESG filter based on a number of exclusions and ESG screening based on companies’ ESG ratings to eliminate the worst offenders3

Portfolio construction constraints include a weighting floor of 50%  of US companies and a 10% cap for other countries, and the portfolio is rebalanced based on an equal weighting methodology, which Millet says avoids an over-representation of ultra large capitalisations just making it to the top 150 by gender ranking . This construction method also leads to the portfolio looking very different from the MSCI World Index in certain areas.​​​​​​​

The ETF also has underweights in sectors like healthcare and energy and overweights in financials, communication services and consumer staples, which tend to have better gender rankings. In terms of risk factors, we are more weighted towards the smallest large-caps. Also, we have a bias towards companies which tend to have lower earnings viability and higher dividend payment policies.

​​​​​​​Future developments

Millet and Van Maasdijk also see further possible areas of expansion for gender equality data and how it could be used in the future, as ESG investing continues to evolve.

Van Maasdijk said: 


“People who are interested in ESG investing are asking for more ‘S’ standards within the products they want to invest in. So apart from expanding our research into companies in emerging markets, I would also like to look into small-cap companies.”
“When it comes to the issues of gender equality, it is also really important to look at the intersection of other social issues around discrimination within the workforce. This means addressing issues of ethnicity and acknowledging that although there is discrimination based on gender, the experience of a white woman will be different than the experience of a black woman within the workforce and leadership roles.”

​​​​​​​

Millet added: 

“I think we will have a larger set of reported data and a smaller set of estimated data, because there will hopefully be progress in mandatory disclosure obligations on corporates and also a better standardisation of the ratios that will be reported. 
“In terms of thematic investment, as people have completed the integration of climate-aligned strategies, they are now focusing on other thematic strategies which have been backstage in the last years. 
“Social issues are crucial, of which human capital is the essential pillar and gender equality is a big component of that. We see appetite for more pure social thematic products than we had in the past, where certainly the focus was diverted by global policies or the reporting obligations of our investors. Gender equality will continue to be a strong pillar for that.”

​​​​​​​

Past performance is not indicative of future returns.

1. Source: Equileap, as at November 2022
2. SFDR: “Sustainable Finance Disclosure Regulation” – 2019/2088/EU. European Union regulation that requires, amongst other things, the classification of financial products according to their ESG intensity. A fund is referred to as “Article 8” if it promotes ESG characteristics in tandem with other financial objectives, or “Article 9” when it has a sustainable investment objective. Any fund that does not comply with the two previous categories is an “Article 6” fund.
3. For further information visit www.solactive.com. 
This material is based on sources that Amundi and/or any of her subsidiaries consider to be reliable at the time of publication. Data, opinions and analysis may be changed without notice. Amundi and/or any of her subsidiaries accept no liability whatsoever, whether direct or indirect, that may arise from the use of information contained in this material. Amundi and/or any of her subsidiaries can in no way be held responsible for any decision or investment made on the basis of information contained in this material.


KNOWING YOUR RISK
It is important for potential investors to evaluate the risks described below and in the fund’s Key Investor Information Document (“KIID”) and prospectus available on our websites www.amundietf.com.
CAPITAL AT RISK - ETFs are tracking instruments. Their risk profile is similar to a direct investment in the underlying index. Investors’ capital is fully at risk and investors may not get back the amount originally invested.
UNDERLYING RISK - The underlying index of an ETF may be complex and volatile. For example, ETFs exposed to Emerging Markets carry a greater risk of potential loss than investment in Developed Markets as they are exposed to a wide range of unpredictable Emerging Market risks.
REPLICATION RISK - The fund’s objectives might not be reached due to unexpected events on the underlying markets which will impact the index calculation and the efficient fund replication.
COUNTERPARTY RISK - Investors are exposed to risks resulting from the use of an OTC swap (over-the-counter) or securities lending with the respective counterparty(-ies). Counterparty(-ies) are credit institution(s) whose name(s) can be found on the fund’s website amundietf.com or lyxoretf.com. In line with the UCITS guidelines, the exposure to the counterparty cannot exceed 10% of the total assets of the fund. 
CURRENCY RISK – An ETF may be exposed to currency risk if the ETF is denominated in a currency different to that of the underlying index securities it is tracking. This means that exchange rate fluctuations could have a negative or positive effect on returns.
LIQUIDITY RISK – There is a risk associated with the markets to which the ETF is exposed. The price and the value of investments are linked to the liquidity risk of the underlying index components. Investments can go up or down. In addition, on the secondary market liquidity is provided by registered market makers on the respective stock exchange where the ETF is listed. On exchange, liquidity may be limited as a result of a suspension in the underlying market represented by the underlying index tracked by the ETF; a failure in the systems of one of the relevant stock exchanges, or other market-maker systems; or an abnormal trading situation or event.
VOLATILITY RISK – The ETF is exposed to changes in the volatility patterns of the underlying index relevant markets. The ETF value can change rapidly and unpredictably, and potentially move in a large magnitude, up or down.
CONCENTRATION RISK – Thematic ETFs select stocks or bonds for their portfolio from the original benchmark index. Where selection rules are extensive, it can lead to a more concentrated portfolio where risk is spread over fewer stocks than the original benchmark.

​​​​​​​For Professional Clients only.  In the United Kingdom (the “UK”), this marketing communication is being issued by Amundi (UK) Limited (“Amundi UK”), 77 Coleman Street, London EC2R 5BJ, UK. Amundi (UK) Limited is authorised and regulated by the Financial Conduct Authority (“FCA”) and entered on the FCA’s Financial Services Register under number 114503. This may be checked at https://register.fca.org.uk/ and further information of its authorisation is available on request. Past performance is not a guarantee or indication of future results. 
This marketing communication is only directed at persons who are Professional Clients (as defined in the FCA’s Handbook of Rules and Guidance), is not intended for citizens or residents of the United States of America or to any “U.S. Person” (as this term is defined in SEC Regulation S under the U.S. Securities Act of 1933) and must not be distributed to the public, nor relied on or acted upon by any other persons for any purposes whatsoever. Amundi UK, and/or any of its affiliates (“Amundi”) accepts no liability whatsoever, whether direct or indirect, that may arise from the use of information contained in this marketing communication. Amundi does not give any guarantee (whether express or implied), warranty, undertaking or representation as to the accuracy, validity, relevance, exhaustiveness, timeliness, completeness and/or reliability of the information contained herein. The opinions expressed reflect the current judgement of the personnel of Amundi and may be subject to change without notice. This marketing communication is for informational purposes only and does not constitute an offer, a solicitation, an investment advice or an investment recommendation to buy or sell. 
Lyxor Global Gender Equality (DR) UCITS ETF is not sponsored, promoted, sold or supported in any other manner by Solactive AG nor does Solactive AG offer any express or implicit guarantee or assurance either with regard to the results of using the Index and/or Index trade mark or the Index Price at any time or in any other respect. The Index is calculated and published by Solactive AG. Solactive AG uses its best efforts to ensure that the Index is calculated correctly. Irrespective of its obligations towards the issuer, Solactive AG has no obligation to point out errors in the Index to third parties including but not limited to investors and/or financial intermediaries of Lyxor Global Gender Equality (DR) UCITS ETF. Neither publication of the Index by Solactive AG nor the licensing of the Index or Index trade mark for the purpose of use in connection with Lyxor Global Gender Equality (DR) UCITS ETF constitutes a recommendation by Solactive AG to invest capital in Lyxor Global Gender Equality (DR) UCITS ETF nor does it in any way represent an assurance or opinion of Solactive AG with regard to any investment in Lyxor Global Gender Equality (DR) UCITS ETF.
​​​​​​​The fund referred to in this marketing communication (the “Fund”) is a recognised collective investment scheme for the purposes of Section 264 of the Financial Services and Markets Act 2000. Investment in the Fund must only be made based on the key investor information document and its prospectus, which include information on the investment risks, and are available in English on amundietf.co.uk.   Transaction costs may occur when trading ETFs. Potential investors in the UK should be aware that none of the protections afforded by the UK regulatory system will apply to an investment in the Fund and that compensation will not be available under the UK Financial Services Compensation Scheme. 


Share

Twitter

LinkedIn

Email