By: Fong Yee Chan, senior product manager, sustainable investing
March 8 is International Women’s Day. This week we’d like to reflect on the progress being made to improve diversity in the global work force. In recent years, a series of initiatives have been enacted around the world to encourage a more diverse and inclusive work environment by increasing female representation at leadership levels. Current research suggests that increasing women’s participation on corporate boards can result in economic and financial benefits, such as increased female employment at all levels as well as positive corporate performance. Socially conscious market participants can aid in this movement by focusing their attention on companies that are improving diversity in their work force.
FTSE Russell conducted an analysis using the FTSE Developed Index universe of companies to determine how various countries were faring on gender diversity at the board level by calculating the “Women on Boards” (WoB) ratio. The findings below show that more effort is needed across all countries to achieve gender equality at leadership levels. The UK has an average WoB ratio of 25%, lagging behind its European peers. The US has an average WoB ratio of only 20%, leaving it in the bottom half of its developed market peers.
One way to accelerate companies’ commitment to diversity is by enabling market participants to invest in companies with commitments to diversity. On February 2, 2018, FTSE Russell launched the FTSE Women on Boards Leadership Index Series. This index series is designed to help market participants integrate leadership in gender diversity and social impact into a broad market benchmark. The index series achieves this by using a tilt (or stock weight adjustment) to integrate gender diversity and social impacts as factors in the index weightings.
The FTSE Women on Boards Leadership Index Series enables investors to integrate gender diversity and social impact in several key ways. First, the indexes increase exposure to companies that have a higher than average WoB ratio. Secondly, the index series provides risk and return characteristics that closely match the underlying broad market index. Finally, the index series accounts for industry bias by applying an industry neutral adjustment. As of November 20, 2017, the FTSE All-Share Women on Boards Leadership Index exhibited a higher WoB ratio of 25% compared to the parent index’s 19% WoB ratio.
On International Women’s Day we are reminded to focus on initiatives designed to increase diversity in the global work force. Market participants can send a powerful message about the importance of diversity by focusing on indexes such as the FTSE Women on Boards Leadership Index Series.
Please see the FTSE Russell paper Incorporating diversity into passive investments for more information.
 See Hewlett, S. et al., 2013, “Innovation, diversity and market growth”; and McKinsey & Co, “Diversity Matters”, February 2015.
 Source: FTSE Russell. This information reflects hypothetical historical data.
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