The two companies have teamed up to launch first-of-its-kind benchmark for gender equality in emerging markets.

Equileap, the organisation which aims to accelerate progress towards gender equality in the corporate world, has partnered with Solactive to launch the Solactive Equileap Emerging Markets Gender Equality Index.

Investing in companies with a gender lens is not only good for the world but also good for the wallet - Diana van Maasdijk, Equileap

The index tracks firms from emerging markets with a strong performance in relation to gender equality. Equileap evaluates firms on gender equality criteria taking into account factors such as the percentage of women in leadership and on the board, equality of compensation and work-life balance policies, gender pay gap and anti-sexual harassment policies.

"Given the success of our previous collaboration, we thought there was an opportunity to expand the partnership and create a new index," Diana van Maasdijk (pictured), CEO at Equileap, told SRP.

"The hypothesis behind the index is really simple. We've seen it many times when we have back tested other indices. When you build an index with the companies that have a better gender balance, you're actually choosing the better companies. Investing in companies with a gender lens is not only good for the world but also good for the wallet."

According to Van Maasdijk, the index fosters a more balanced and equitable investment landscape in emerging markets while maintaining a similar risk profile compared to a standard broad emerging markets benchmark, by applying a best-in-class approach across sectors.

"It's really important to point that it's an index that keeps all of the sectors and the best in class in the sectors. So, you go down sector by sector and choose those that have better gender equality parameters. That's what's gives this index a unique edge within our gender equality index family," she said.

The index ensures a focus on gender equality by selecting only the top 50% of companies per sector according to the Equileap Gender Equality Score and is screened for standard ESG criteria, such as critical activities and unethical business practices. The index focuses on emerging markets and uses the Solactive GBS Emerging Markets Large & Mid Cap Index, as the basis  for selection.

"This approach ensures that the risk profile and sector exposure is in line with the benchmark while allowing investors to gain gender equality aware exposure to emerging markets," said Timo Engelbertz, associate equity product development, ESG Solutions, at Solactive.

The index, which comprises over 600 selected companies, has delivered an annual outperformance of 25% over its benchmark on a risk-adjusted basis when back-tested. While showing a similar risk profile, the annualized average return is approximately 3.87 percentage points higher compared to the parent index, based on the net total return version.

ESG dynamics

Equileap has had a successful partnership with Solactive since 2018 when they launched a family of ESG gender equality indices covering the developed markets. These indices have been used in structured products issued by Citibank and well as in an ETF issued by UBS – the total AuM from products linked to these indices amounts to almost US$1 billion.

The growth in ESG products has been dominated by climate related products focusing strongly on the “E” in ESG - Fabian Colin, Solactive

Equileap expanded last year into research of emerging markets which researched an extra 1500 companies in emerging markets which represents about 85% of the emerging markets' free-floating market. With this new data, the company partnered again with Solactive to create a Gender Equality Index of emerging markets.

The launch of the new index comes at a low time for ESG products with several factors negatively impacting ESG sentiment recently including the strong performance delivered by energy and military companies as well as regulatory uncertainty.

Demand for environmental solutions in the climate space remain focused on biodiversity and clean energy, and most of the social activity has been addressed via positive impact programmes and initiatives.

With the new index, investors can now implement social aspects into their portfolios and fill an existing gap in the market.

"The growth in ESG products has been dominated by climate related products focusing strongly on the “E” in ESG," said Fabian Colin, head of sales at Solactive (right). " The demand for new solutions in this space has slowed down a bit due to some market saturation and also amidst the focus of investors shifting due to the increasing global geopolitical tensions. We do however continue to see demand for new or innovative solutions, one of those is the social or “S” part of ESG."

According to Colin, the E in ESG has suffered some criticism in the past but there is also a natural evolution of this part of the market which is now more focused on social issues.

"With this new gender equality product we are offering our clients a solution for the so far less covered emerging markets. And of course we can adjust the index to client or regulatory needs or even create a global version," he said.

Equileap has also released its 2024 Gender Equality Report & Ranking for developed markets.

Do you have a confidential story, tip, or comment you’d like to share? Write to info@structuredretailproducts.com