New index range targets the female factor

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Global financial benchmark-maker FTSE Russell has released a new female-friendly index series favouring companies with significant gender diversity among their boards.

The London Stock Exchange-owned index provider said last week that the “FTSE Women on Boards Leadership Index Series” would kick off with two products based on UK and US markets.

First to roll off the production line, the FTSE All-Share Women on Boards Leadership Index and the Russell 1000 Women on Boards Leadership Index, follow the series construction guidelines targeting both board gender mix and a broader ‘social impact score’.

Using a ‘rules-based’ approach, FTSE Russell retrofits the underlying indices by applying two filters: a ‘gender diversity adjustment’ ranked according to the ratio of female board members “in excess” of the industry average; and, a ‘social impact adjustment’ scored by the group’s environmental, social and governance (ESG) ratings system.

“The new index series increases exposure to companies based on the strength of their gender diversity leadership at the board level in addition to how well they manage their wider social impact,” the release says. “This is achieved by adopting a factor based approach, tilting stocks to overweight or underweight depending on their gender diversity at board level and social impact score.”

Mark Makepeace, FTSE Russell chief executive, said the new female-empowering index series was a response to the demand for further integration of ESG parts into passive investment vehicles.

“The initial indexes are based on the FTSE UK All-Share and Russell 1000, incorporating a universe of almost 900 companies and can be used by market participants to increase their exposure towards companies demonstrating leadership in this space,” Makepeace said.

“By using a factor-based methodology, we can adopt a positive approach highlighting leadership, promoting awareness and improving inclusive environments at all levels.”

According to disclosure documents, the FTSE All-Share Women on Boards Leadership Index holds just over 270 stocks compared to 458 in the underlying benchmark. Top-scoring companies by industry in the UK across the FTSE female and social impact scores include Royal Dutch Shell, BHP Billiton, GlaxoSmithKline and Unilever.

Meanwhile, the gender-corrected Russell 1000 index represents 614 companies of the 978 in the original with underweights in the insurance, real estate, media, utilities, industrials, construction, travel and leisure, oil and gas and automotive sectors.

– Investment News NZ

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