Closing The Gap

How investors can close corporate America's gender gap—and see serious returns

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#MeToo has arrived on Wall Street. Socially responsible investors are putting their money where they feel it matters most — in the form of funds aimed at closing the gender gap in corporate America.

The State Street Global Advisors Gender Diversity Index ETF, ticker symbol SHE, tracks "companies that have strong gender diversity," said Lynn Blake, executive vice president of State Street.

Blake — whose company commissioned the "Fearless Girl" statue that was placed opposite of the iconic "Charging Bull" in New York City — told CNBC that companies that don't make the index are labelled as having weak gender diversity.

The push to invest in diverse companies comes at a time when numerous women on Main Street have come forward sharing their experiences with workplace discrimination in the wake of #MeToo. The movement became a social force after The New York Times' blockbuster expose in October revealed a pattern of alleged sexual abuse and unwanted physical contact by disgraced Hollywood mogul Harvey Weinstein.

Now, a growing number of shareholders on Wall Street are realizing their capacity to leverage capital and impact corporate behavior.

There's certainly an argument for more gender diversity. A recent study found that companies in the MSCI World Index, a broad global equity index that represents large and mid-cap equity performance, generated return on equity of 10.1 percent per year with strong female leadership versus 7.4 percent for those without.

Additionally, a Morgan Stanley report found that companies with higher gender diversity delivered better returns and lower volatility. Pax's Ellevate Global Women's Leadership Fund, comprised of blue chip names like Gap, Sodexo, Target, Texas Instruments and Johnson & Johnson outperformed the MSCI World Index for the one-year and three-year periods ending Dec. 31, 2017.

Joe Keefe, president and CEO of Pax World Funds, told CNBC he attributes misconduct in the workforce to a lack of female leadership and representation.

If there was ever a time to invest in companies that have more gender diversity, it's now, Keefe said. "We think where women are better represented in leadership you'll have better cultures, you'll have better governance … and you'll have less harassment and less sexual misconduct."

"When you take a step back and think about it," Keefe continued, "that's the way markets are supposed to work. Money is supposed to be incentive to go to the best companies, right? And other companies are supposed to be incentivized to improve because of that," he concluded.

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