M&G has launched a diversity and inclusion fund. The global investment manager will invest in firms that demonstrate gender and ethnic diversity and social inclusion while delivering good returns.
The M&G (Lux) Diversity and Inclusion Fund is a global equity strategy with a concentrated portfolio of 30-40 stocks that aim to provide a higher total return than that of the MSCI ACWI over five years and incorporate sustainability and impact considerations into the stock selection process.
The fund complements M&G’s existing range of impact and sustainable funds and sits under Article 9 of the EU SFDR regulation and will be supervised by the firm’s Fund Manager, Thembeka Stemela Dagbo, with the help of John William Olsen, Director of Global Equities, Fund Manager.
Supported by the M&G’s Stewardship & Sustainability team, the new fund aligns with the United Nations Sustainable Development Goals (SDG) framework by mapping each holding to its prime or dominant SDG and focusing on six areas: Quality Education, Gender Equality, Decent Work and Economic Growth, Industry, Innovation and Infrastructure, Reduced Inequalities and Peace, Justice and Strong Institutions.
M&G will then annually report key diversity and impact indicators at the stock level, stating their absolute level and their year on year change.
At least 15% of the portfolio will invest in impact-driven firms that offer solutions to create social inclusion. This portion follows the same investment approach as M&G’s Positive Impact and Climate Solution strategies that assess stocks with the ‘III’ framework, which involves assessing each company’s Investment, Intention and Impact and classifying them as ‘pioneers’, ‘enablers’ and ‘leaders’.
The rest of the fund is dedicated to sustainable companies that demonstrate gender and ethnic diversity at work. This goes beyond representation by assessing diversity by targets, processes and policies such as flexible working policies, parental leave, anti-harassment policies, strategy, and pay gap reporting.
Stocks in this portion of the portfolio require a minimum of 30% women or ethnic minority representation at the board level at the time of purchase. They must pass the ‘E.Q.L’ framework, where the team assesses ESG credentials, quality of the business model and leadership characteristics of each stock.
Thembeka Stemela Dagbo said: “Social inclusion and diversity are not only the right thing to do, but they also make good economic sense. Left unaddressed, the exclusion of disadvantaged groups and the lack of diversity can be costly and result in lost GDP and human capital wealth. In contrast, pioneers of diversity and inclusion initiatives are increasingly recognised for their financial outperformance.
“Indeed, companies with top quartile levels of gender diversity are 25% more likely to outperform, and 36% more likely for ethnically diverse ones. This fund provides our customers with the opportunity to capitalise on these trends and address diversity imbalances while putting their savings to work with a purpose.”