gender diversity insight for investors

Gender diversity insight for investors unveiled

Monday, March 12, 2018

Real estate companies comprise 7.3 per cent of the membership of the newly launched MSCI Canada women’s leadership index, which benchmarks the performance of select stocks in Canadian equity markets against MSCI’s broader investable market index (IMI). The 95 participants reflected in the inaugural index results meet qualifying criteria for the number of women in senior executive roles and the percentage of women on their boards of directors, and are flagged as free from any “severe controversies” related to discrimination, labour rights or workplace diversity.

MSCI offers both performance evidence and market theory to support the addition of this new index to its portfolio of indices — which also includes the Canada property index, Canada fund index and the green index — providing investment information worldwide. Notably, inaugural results show the women’s leadership index delivered a 10.1 per cent return in 2017 versus the total IMI’s 8.78 per cent return.

“Companies failing to employ women — at any level — in numbers proportional to their availability are, by definition, limiting the size of their talent pool. In contrast, higher numbers of women, particularly in senior positions, might indicate a savvier approach to talent — one that just might promote productivity and economic growth along with gender equality,” an MSCI statement asserts.

This new product to provide gender diversity insight for investors is aligned with the index producer’s environmental, social and governance (ESG) research and ratings. MSCI also points to the United Nations’ sustainable development goals as an underlying buttress, along with the need for women’s unencumbered participation in the labour force to drive global economic growth and productivity.

Since only publicly traded entities are part of the analysis, many of Canada’s largest real estate players are excluded. However, other requirements to make the list of what MSCI terms “gender diversity leaders” would eliminate several of them anyway.

Participation in the women’s leadership index is contingent on meeting or exceeding a leadership quotient of: three female directors; 30 per cent female directors; or two female directors and a CEO or CFO who is a woman. These companies’ boards of directors must also report a higher percentage of female members than the overall average for the 317 entities in the Canada IMI. This will be tabulated quarterly, at the end of January, April, July and October.

Numerically, about 30 per cent of the parent index is represented in the women’s leadership index, but it carries considerably more clout from the perspective of market capitalization. The top 10 constituents of the women’s leadership index account for 39 per cent of the weighted value of the parent index. (Royal Bank of Canada and Toronto-Dominion Bank are ranked one and two in both indices.) From May 31, 2016 to January 31, 2018, the women’s leadership index collectively outperformed the Canada IMI, with gross returns of 12.65 per cent versus 11.25 per cent for larger index.

As part of the sector-neutral design of the women’s leadership index, real estate is given a 1.9 per cent weighting among the 11 GICS sectors — equivalent to its weight in the parent index. Financials carry the most weight, at 37.6 per cent, while health care falls into the 11th position at 0.87 per cent.

Seven companies carry real estate’s banner in the inaugural index: Brookfield Asset Management; Cominar REIT; Dream; Extendicare; First Capital Realty Inc.; RioCan REIT; and Sienna Senior Living. Some service providers to the real estate industry are also represented, including: Altus Group; DIRTT Environmental Solutions; SNC-Lavalin Group; Stantec; and WSP Global.

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