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ETFs to Play Growing Women Empowerment in Corporate America

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The percentage of women heading U.S. companies has been on the rise lately. Of the 591 replacement CEOs recorded in the first half of 2020, 138, or 23.4% were women, according to outplacement as executive coaching firm Challenger, Gray & Christmas, quoted in an article published on Yahoo Finance. This is the highest rate recorded since Challenger began tracking gender metrics in 2010.

The latest increase is up from 21.6% of female CEO replacements in the first half of 2019 and up 18.6% from the first half of 2018. The trend is perhaps quite necessary as companies with greater gender diversity on their board are often regarded as more in line with the Environmental, Social and Governance (ESG) objective.

Women are at the helm of many government and nonprofit jobs, accounting for 58.5% of all incoming CEOs in that sector. Of the six incoming CEOs in the apparel industry, three are women. In the tech sector, there were 79 total replacements. So far in 2020, women have replaced male CEOs 92 times, up from 81 times during the first half of 2019.

However, there were declines also in female representation at the top of health care and retail companies. About 30% of new hospital CEOs are women this year, down from 36% the same period last year. Retailers have announced two new women CEOs out of 14, or 14%, down from 22% in 2019, the Yahoo Finance article noted.  

Is This an Emerging ESG Trend?

S&P Global Market Intelligence’s study, When Women Lead, Firms Win, found that firms with female CFOs are more profitable and have produced superior stock price performance compared to the market average. S&P Global also researched that women are the most underutilized source of growth that could send global market valuations soaring.

As a result, public companies are facing growing investor pressure to improve diversity among their director ranks. This addresses the ESG issues. Notably, companies compliant to the ESG concept  are better investment bets as lesser focus on such issues by the companies may result in lawsuits, fines and damages, per many analysts (read: Here's Why ESG ETFs Are Hot Amid Pandemic).

Governments and regulators have become increasingly observant of companies’ female representation. For example, California's law mandates certain publicly traded companies to include women on their boards. This would more than double the total number of female-occupied board seats in the state, per S&P Global. Other U.S. state governments, including New Jersey, Illinois, and Massachusetts, have taken efforts to announce similar legislation related to gender diversity on boards of directors.

Most recently, the billionaire hedge fund manager Bill Ackman tapped a cohort of minority, women and veteran-owned firms (also known as MWVBEs), for his initial public offering. It was the activist investor’s first IPO in the United States, and he put stress on the inclusion of MWVBE firms.

ETFs in Focus

Against this backdrop, it would be intriguing to bet on three ETFs offering a broad exposure to women-led companies. We have highlighted them in detail below.

SPDR SSGA Gender Diversity Index ETF (SHE - Free Report)

This ETF offers exposure to U.S. companies that demonstrate greater gender diversity within senior leadership than other firms in their sector by tracking the SSGA Gender Diversity Index. It holds 167 stocks with none accounting for more than 5.91% share. From a sector look, information technology, healthcare, financials and consumer discretionary receive double-digit exposure (read: PayPal Surges on Upbeat Q2 Outlook: ETFs to Benefit).

Impact Shares YWCA Women’s Empowerment ETF (WOMN - Free Report)

The fund tracks the Morningstar Women’s Empowerment Index, which is designed to provide exposure to companies worldwide with strong policies and practices in support of women’s empowerment and gender equality. It holds about 180 stocks in its portfolio.

Barclays Women in Leadership ETN (WIL - Free Report)

This product is linked to the performance of the Barclays Women in Leadership Total Return USD Index, which provides exposure to U.S.-based companies that satisfy one or both of the gender diversity criteria of having a female chief executive officer or having at least 25% female members on the board of directors.

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