This International Women’s Day on March 8 you can vote for the empowerment of women with your savings as well as your ballot.
The YWCA Impact Shares Women’s Empowerment ETF WOMN, -0.83% bills itself as the first socially conscious, ESG (Environmental, Social and Governance) exchange-traded fund that singles out women’s issues specifically in its investment policy.
If the new fund succeeds it could prove a model for other ESG funds to target specific issues in the future.
“We’re looking for corporations that want to be a leader in women’s empowerment,” says Ethan Powell, CEO of fund manager Impact Shares. “We launched, operate and distribute the fund on behalf of the YWCA. It provides the YWCA a seat in the corporate boardroom.”
The ETF, which was launched last August, invests in companies based on 19 screens designed to measure their commitment to gender equality and fairness. They include how much companies embrace equal treatment in hiring, pay and promotion, ensure the representation of women in senior management and leadership roles, offer generous parental leave and options for flexible work, and combat any sexual harassment or violence in the workplace. They also measure how far companies ensure their suppliers support equality and human rights as well.
Another female-focused ETF launched in 2016, the SPDR SSGA Gender Diversity Index SHE, -0.79% , focuses on companies with higher than average rates of women in leadership roles.
The screens “align with the YWCA’s vision of how corporations can advance women’s empowerment and gender equality,” says Impact Shares. “We really view (them) as a road map for the private sector to engage on women’s issues,” says Powell. The fund measures companies on so many screens to avoid rewarding companies for mere tokenism, he says. Otherwise it’s too easy, for example, for companies to put a couple of women on the board and do nothing else to change the culture or processes, he adds. “Those [things] are easy to manipulate,” he says.
The screens were designed with the help of Equileap, a Dutch-based nonprofit focused on gender equality, and form the basis of the Morningstar Women’s Empowerment Index.
Single-issue social funds are unusual. Currently most socially-conscious funds and management companies follow a broad mandate in which they measure companies based on a number of social issues, of which gender equality is typically only one.
The investment process involves multiple steps. The fund’s managers and advisers don’t simply screen companies on the 19 metrics and then invest in those that come out best. They also ensure that the fund is diversified by sector, and between “value” and “growth” stocks, so that investors don’t find themselves unwittingly owning a risky fund tilted too much towards any particular style or a small group of stocks.
The companies in which they invest are the best in each sector, says Powell. So oil giant XOM, +1.11% appears among the top holdings because they decided the oil giant meets the 19 screens better than many others within the energy sector. “It’s better… on a relative basis,” says Powell.
It’s too early to draw many investment conclusions, if any, from the performance of the fund. The ETF was launched near the peak of the market. Since then, says FactSet, it has produced a net return of -2.5%. The Russell 1000 Index RUI, -0.79% of large and mid-sized companies over the same period: -3.5%.
The ETF seems to have broadly followed the market throughout that period. The Dow Jones Industrial Index DJIA, -0.78% and S&P 500 SPX, -0.81% are down around 1% and 3.5% respectively over the last six months.
The total expense ratio is 0.76%, but most of that (up to 0.6%) will go to YWCA to support its mission and social advocacy, says Powell. Fund administration will be around 0.26%, he says. Impact Shares in a registered non-profit. Right now the fund has just $4 million in assets, and the fund fees are being subsidized by the Rockefeller Foundation.
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