One of the great things about investing in socially responsible mutual funds is that you can specifically target issues that concern you personally. The Women’s Equity Fund (Ticker: PXWEX) searches for companies that excel in gender equality and women’s empowerment. But that’s not all it does: The fund also invests in successful companies that are social and environmental leaders, and screens out companies with significant holdings in tobacco, alcohol, gambling and weapons manufacture.
Historian David Landes, author of The Wealth and Poverty of Nations, says, “The best clue to a nation’s growth and development potential is the status and role of women.”
Pax World Mutual Funds, which owns the Women’s Equity Fund, believes that companies with progressive policies toward women will have better financial success. A Catalyst study backs it up: Over time, companies with the highest number of women on their boards outperformed those with the lowest number of women. The Fund, which gets high ratings from Mor-ningstar and Lipper, invests in companies of all sizes and can invest up to 45 percent of the portfolio outside the U.S. It chooses companies that take affirmative steps to attract, retain and promote women, and to advance gender equity in society in general. It also invests in women-owned businesses and puts up to five percent of its assets into Third World microfinance initiatives which loan women money to start their own businesses.
When making its analysis, the Fund asks: Does the company have women on the board and if so, how many? Does it promote women to top executive positions and compensate them accordingly? Are there career development and training programs for female employees? Are there programs that help women balance career and personal life such as daycare? Are there policies that encourage women-owned companies as suppliers?
Some companies certainly stand out, though not all are green. “Nord-strom is unique among retailers,” says Portfolio Manager Sujatha Avutu. “Women not only make up a third of its nine-member board and six of its 20 top executives, but the company has a supplier diversity program that works to increase the amount of business it does with women-owned firms. It also offers 84 days of family and medical leave—well in excess of the 12 weeks of unpaid leave required by federal labor laws.”
In the energy sector, Avutu singles out BP, a third of whose board and executive management is female, and which regularly reports on gender diversity in management. “Representation of women is increasing very nicely,” she says.
Another example is Bright Horizons, whose business model is all about women’s needs. Its 640 childcare centers serve about 95 Fortune 500 companies and 75 of Working Mother magazine’s 100 Best Companies. In addition to strong representation on the board (six of 13 members) and eight senior executives, a diversity council is responsible for recruiting and retaining female employees and promoting gender equality throughout the company. Bright Horizons offers childcare discounts, flexible work schedules and back-up child care.
Using Bad Actors
The Fund avoids investing in companies involved in exploitation or trafficking of women, whose products demean women or who use negative stereotypes in their advertising, promotion or marketing. It steers clear of companies that have a history of discrimination or mistreatment of women.
A hallmark of social mutual funds is that they also engage management in a dialogue, pressuring decision-makers to improve their practices. Sometimes they invest in “bad actors’ specifically to use the shareholder process in this way. “There’s a huge gap in disclosure when it comes to gender-related programs,” Avutu says. “We”ll also be working with companies to develop policies that prevent human trafficking.”
Although the financial sector is the largest in the portfolio at 15 percent, the Fund makes no investment in companies involved in mortgage and consumer finance. Problems there have been brewing for at least a year, says Avutu. “We include financial companies to diversify our portfolio, but invest in those that do accounting and back-office management for financial firms instead.”
For women’s colleges, foundations and nonprofits that focus on gender issues and want to align their investments with their values, and for ethically driven individual investors, too, the Women’s Equity Fund offers a particularly attractive option.