Could you inadvertently be harming women’s equity with your investing approach? If you are investing to get the returns of the S&P 500 without considering how these investments affect women, then the answer is yes.
Of the approximately 5000 stock indexes available in the U.S., the most widely known and followed is the S&P 500. The S&P 500, or Standard & Poor’s 500, is an index of the top 500 companies in the United States, representing approximately 80% of the total value of the U.S. stock market.
In 2020, Equileap conducted an analysis of 19 gender criteria for the companies comprising the S&P 500. The result is a report entitled Gender Equality in the U.S. For the women and men who work at these top 500 U.S. companies.
The Equileap study revealed that:
- Less than half of these employers offer two weeks or more of paid primary caregiver leave.
- Only 14% offer paid primary caregiver leave at or above 14 weeks (the official recommendation of the International Labor Organization’s Maternity Protection Convention).
- A scant 18% offer both flexible work hours and locations.
Not only do companies directly affect the lives of their workers and their customers, but they may also indirectly impact the lives of women and the public at large. For example, various forms of pollution can lead to poor birth outcomes for pregnant women. Companies that reduce toxic emissions, effluents, and waste that harm prenatal and infant health are indirectly championing women’s rights.
The 19 gender criteria used in the Equileap study mirror the United Nation’s Women Empowerment Principles. These principles include gender balance in leadership and the workforce, equal pay, transparency, accountability, work-life balance, and protection from sexual harassment. The results of the Equileap study are also sobering when it comes to women in leadership in the “top” 500 U.S. companies:
- Only 6% of the companies have a female CEO,
- 13% have a female CFO, and
- 4% have a female holding the position of Chair of the Board of Directors.
- Close to 80% of the companies do not have women at the Chair, CEO, or CFO level.
Why does your investing approach matter from an investor’s perspective?
Research indicates that companies with more diverse boards and more women in leadership have greater financial performance and lower investment risk.
In other words, if you are investing in a mutual fund or ETF that tracks the S&P 500, you are likely inadvertently harming women with your investing. Logically the majority of other indices also result in the same negative outcomes for women workers, and their families and communities.
There are a few notable exceptions, such as the MSCI KLD 400 index and the Adasina Social Justice Index. Unlike buying organic foods to “do the right thing” when it comes to your health, however, you don’t necessarily have to spend more to do better. But, it’s not that simple to research every company for yourself. Let alone know how to divest from those with policies and practices that are not friendly or fair to women!
For example, an employer-sponsored 401(k) or 403(b) retirement plan is a wonderful perk. But you are generally offered a very small number of options in the funds available to you. You may approach your plan administrator to convince them to add options that promote gender equity to your retirement plan. Easier said than done, of course! Meaningful change may take time and possibly building a coalition of your colleagues to strengthen your persuasion position.
If you have an individual retirement account (IRA), on the other hand, you have much more flexibility and control. Again, however, the time and effort to conduct meaningful analysis on each and every company in a mutual fund of interest to you can be daunting.
Envision Wealth Planning Aligns Investing Approach with Personal Values
Luckily this research is what we do at Envision Wealth Planning. Our passion is about aligning your investments with your personal values. Our Envision Justice Series Portfolios™ screen for female empowerment, anti-racism, and planet protection. The Envision Wealth Planning investment process starts with qualifying and quantifying your goals. We will help you select a portfolio that meets your individualized requirements. Requirements that include a timeline, risk tolerance, and return.
We call this part of our process “Risk-Adjusted, Return-Enhanced” Investing (RARE™). We then take it a step further, incorporating your values into your investing —what we call “Values-Integrated Portfolio” (VIP™) Investing. We benchmark our Envision Justice Series Portfolios™ against commercially available investments from some of the most well-known mutual fund companies.
Are you to learn if our RARE™ VIP™ investing approach is right for you? Start here.
As a financial consultant, specializing in the financial needs of women (whether they are married, divorced, single, or…), Kathleen Connors understands that you want to work with an adviser who is relatable and trustworthy. She focuses on life’s unique goals and takes the time to educate her clients about their financial future. Kathleen is passionate about helping women reach clarity and confidence around their finances. It doesn’t matter where a client may be in their life’s journey. She brings warmth and compassion to the financial planning process, with no judgments.