A major pension plan is backing a new exchange-traded fund from Royal Bank of Canada that will focus on companies serious about gender diversity.
The RBC Vision Women’s Leadership MSCI Canada Index ETF is set to launch Thursday, which is International Women’s Day.
Satish Rai, chief investment officer of capital markets at the Ontario Municipal Employees Retirement System, says the pension fund is initially committing $100 million to the ETF.
“I really believe in this case we’ve got a win-win situation,” Rai said Wednesday.
RBC Global Asset Management will run the new fund, which is aimed at Canadian companies that have “demonstrated commitment to gender diversity as part of their corporate social responsibility strategy,” the prospectus said.
The index the ETF is looking to track is the MSCI Canada IMI Women’s Leadership Select Index, whose largest constituents include RBC itself, as well as Toronto-Dominion Bank, Suncor Energy Inc. and Enbridge Inc., according to MSCI.
The MSCI index includes companies that have at least three female directors on their board, or a board that is 30 per cent female. There could also be two female directors and one female in a C-suite role, such as chief executive officer, the prospectus said.
RBC’s new ETF is a part of its “Vision Funds,” which include the firms’ options for socially responsible investments. Lindsay Patrick, director of global ETF strategy at RBC Capital Markets, said Wednesday morning that Canada still lags other developed countries in this regard.
“And I think it’s time we had a solution, and a positive incentive, to bring Canadian corporates to the table,” said Patrick during a panel discussion.
The management fee will be 0.25 per cent for the fund, which will trade on the Aequitas NEO Exchange Inc. with the ticker symbol RLDR. And while similar funds exist — such as the Evolve North American Gender Diversity Index ETF — RBC says investors were interested in a product that was focused on Canada.
“We decided to do this fund predominantly because through consulting with our channel partners, talking to investors both retail and institutional … there is clearly an interest in investing in products like this one, products that have more of an impact bend to them, specifically around women’s leadership,” said Mark Neill, head of RBC ETFs, in an interview with the Financial Post. “There’s lots of interest in supporting that.”
Neill said there are about 95 companies in Canada that meet the requirements and are currently included in the MSCI index, a number that RBC hopes to see grow.
According to the index provider, MSCI Inc., companies that have both mostly male boards and “lagging” talent management practices saw growth of their employee productivity trail industry medians by an average of 1.2 percentage points.
“Companies with both a more diverse board and stronger talent management practices enjoyed higher growth in employee productivity compared to companies with a diverse board only and to companies with strong talent management practices only,” said a recent report by MSCI. “All of these groups outperformed companies with both mostly male boards and lagging talent management practices; those companies had the lowest rates of employee productivity growth, relative to industry peers.”
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