Female leadership can improve an organisation’s CSR, especially in the areas of diversity and governance, and gender based investment portfolio is now a new asset class, says Ser-Huang Poon
Initial findings from a study of gender-based Exchange Traded Products (ETPs) led by Professor of Finance Ser-Huang Poon has found that female leadership is linked to an organisation’s better Corporate Social Responsibility (CSR) performance.
Prof Poon, who is heading up a number of investment-related gender diversity studies, has co-authored a report ‘Investing in Gender Diversity’ which looks into the impact that female corporate leadership, among these ETP constituent companies, has in the boardroom.
As she explains: “This has become an increasingly active research area in recent years, as indices and funds such as State Street Global Advisors’ SSGA Gender Diversity Index and MSCI’s Women Leadership index have emerged that focus on gender diversity.”
ETPs are securities which can be benchmarked against stocks and commodities, and Prof Poon used data from 2002 to 2015 to reconstruct ‘SHE’, an Exchange Traded Fund launched last year that seeks to track the SSGA Gender Diversity Index, which focuses on the performance of large-capitalization US companies that rank highest in their sector in terms of gender diversity within their senior leadership positions.
Reversing the rules used to construct SHE and constructing a male equivalent ‘HE’, her results show that the risk-adjusted return of SHE is statistically less risky than that of HE.
She added: “Our study found that corporate female leadership also helped to improve corporate social responsibility performance and we can conclude from these initial findings that gender-based ETPs represent an important and new asset class. They provide an insurance-like benefit as they are less risky, possess some positive CSR attributes, and have an important dimension of promoting gender equality.”
In 2014, the average share of women on the boards of the largest publicly listed companies across the EU reached 19%. Findings suggest women are more likely to be on boards of large firms as when smaller companies are included the board female ratio is approximately halved.
Research to date suggests gender diversity does not immediately lead to better or worse company performance, or have any impact on shareholder value. However studies have shown that women directors significantly contribute to corporate social responsibility in countries with greater shareholder protection and greater gender parity.