Gender equity ETFs identify circumstances workers need to 'flourish': Portfolio manager

BNY Mellon Investment Management launches its latest ETF driven by investing to close the gender wage gap and improve gender equity between workers. Newton Investment Management Senior Portfolio Manager Julianne McHugh joins Yahoo Finance Live to discuss this category of ETFs, including BNY Mellon Women's Opportunities ETF (BKWO)

"There's two aspects of the kinds of companies that we'll invest in: first is those that embody those practices that enable women's opportunities," McHugh says on investments into tech and health stocks. "We're also looking at the opinions, though, because there is evidence to show if you pay attention to the human capital and that people are happy, those stocks do actually have higher returns."

McHugh also highlights the economic benefits of adding more women to the U.S. workforce, emphasizing it as a high priority in working to close gender wage and equity gaps.

Video transcript

RACHELLE AKUFFO: According to the World Economic Forum, the priority in global diversity, equity, and inclusion programs is still focused on women, accounting for 79%. With a gender wage gap showing signs it's sluggishly closing and the focus is still being put on social issues, investors are thinking about where to invest to help build more equity in the marketplace.

Let's bring in Newton Investment Management senior portfolio manager Julianne McHugh to discuss BNY Mellon's latest ETFs and how they may help to address inequities in the markets as part of the ETF report brought to you by Invesco QQQ. Thank you for joining me this morning here. So break this down for us, these two ETFs here, first starting with BKWO, the ticker there, the BNY Mellon Women's Opportunities ticker. As we see that there, really a focus on tech and health in these holdings, but talk about how this ETF came about.

JULIANNE MCHUGH: We approached this as-- I mean, there's a lot of different ways we can attack gender equality. We approached building this one as-- first of all as investors, second of all as professional women who have gained experience in terms of what has worked and not worked with regards to equality.

And third, also as mothers of boys because, for us, it's not about prioritizing women over men, it's about recognizing that each gender needs different circumstances in order to flourish. And so what we wanted to do is identify those companies that are identifying those opportunities that will enable women to reach their full productivity and help to close the gender gap. And as we know, gender gap--

RACHELLE AKUFFO: Well, as we look at some of the top-- well, I was going to say, as we look at some of the top holdings there here that you have here, talk about why you've picked those because there is that very heavy focus on tech and health. Why specifically those?

JULIANNE MCHUGH: Well, there's two aspects of the kinds of companies that will invest in. First is those that embody those practices that enable women's opportunities. Similar to what other people do in the industry, we are looking at things such as the benefits that the companies offer as well as participation levels, not only at senior leadership methods but also throughout the organization.

We're also looking at the opinions though because there is evidence to show if you pay attention to the human capital and that people are happy, those stocks do actually have higher returns. So with regards to the tech investments, those, many times, are in our embody category. Those are companies that are really providing those opportunities and those equal opportunities to women in the workforce.

The other aspect of why we have potentially more weight in the health care industry is the other category of stocks that we look at we think is a little different than what's out there right now in gender products is we look at those companies that are delivering products and services that will enable women to stay fully participating in the workforce.

Right now, according to the Department of Labor, women still have more of the unpaid responsibilities than men. Some of that is taking care of dependent care, but there's other aspects that might limit my ability to stay full-time engaged, which has to do with some health issues. And so those companies that are providing those health services that are unique to women or providing those dependent care, such as elderly care services, end up becoming things that we think help increase women's opportunities. And that's another reason why those health care names seem to be a higher weight in our strategy.

RACHELLE AKUFFO: And even as we look at the data here-- by having more women in the workforce, as we look at some of the data here in terms of workforce rates, that we could potentially add $28 trillion to the economy if women participated equally to men. I mean, these are stunning numbers here. So you would think we would see more investment in this space. But it does seem like when you-- even when you present the data, you sort of get hit with that stigma as we saw with ESG investing as it's something nice to have or something woke. How do you avoid that when clearly the data shows that it's backing up what you're saying?

JULIANNE MCHUGH: I mean, I think that that's what we just have to rely on is that, you know, first of all that $28 trillion, as I said-- as you said, is what could be added. I mean, that's more than the GDP of the United States. And there's going to be some voluntary reasons why women might not participate fully. But there are some involuntary reasons as well, which I addressed with regards to whether it's health issues or whether it's dependent care responsibilities.

The other statistics that show the support for why we really should care about closing this gender gap is that, you know, the studies show that companies that have diversity in senior leadership outperform those that don't have any diversity in terms of profits, in terms of stock performance, in terms of returns on assets.

Studies also show, as I mentioned to you before, human capital needs. Not only are the companies that are appearing in the Fortune 100 or rated highly on Glassdoor outperforming those that aren't, but there was another study I saw recently that looked at how Glassdoor male versus female employees assessed the company, and those that have a narrower disparity outperform those that have a wider disparity. So caring about where that gender equity is and that equality has financial returns and implications.

RACHELLE AKUFFO: And of course, we have to talk about the other ETF as well, the innovation one. Talk about some of the companies that you're focusing on there and perhaps any concerns that you have about some of these huge valuations and this equity rally that we've seen and how you're really sort of managing some of the holdings in there.

JULIANNE MCHUGH: OK, well, so that is not my-- I am not the manager on that one. But I will say that that is something that we do as an organization is really look at those innovative companies that are building a moat and has the strong management power that can really withhold--

I mean, if you look at Nvidia, you know, they are just embodied into everything within AI and is a real leader in innovation in order to provide that industry aspect. So-- and Costar really is the aspect of a company that really is the material difference with regards to the real estate market. It's sort of the Bloomberg of the real estate market in terms of the data availability.

RACHELLE AKUFFO: So certainly a lot to watch there for and, you know, for people to expand their horizons about how they invest. A big thank you there to Newton Investment Management senior portfolio manager Julianne McHugh. Thank you so much for your time this morning.