Bringing ethnic diversity to indexing

Amid a growing demand for improving corporate diversity, ISS ESG is launching the first index to track executive ethnicity.

The responsible investment arm of proxy advisory firm Institutional Shareholder Services Inc. announced that it has developed a proprietary index comprising companies with broad representation of both ethnic minorities and women on their boards of directors and among their top executives.

To qualify for the ISS ESG U.S. Diversity Index, companies must have at least three “ethnically diverse individuals” and three female directors or executives, along with boards that are at least 35% women or ethnic minorities.

According to ISS ESG, there are currently 251 companies that meet these requirements, up from 147 companies three years ago.

Alongside the new index, the firm also unveiled the ISS ESG Governance QualityScore (GQS) Index family. These investible equity indexes aim to capture well-governed, responsible companies based on ISS ESG’s governance scoring system.

“The family of indices is designed to help investors identify large and middle-capitalization companies with strong board structure, compensation, shareholder rights, and audit and risk oversight practices, as well as those aligned with U.N. Global Compact principles,” ISS ESG said.

The new indexes are available to be licensed for passive investment products or for benchmarking.

“This pioneering family of indices fill an important gap in the current index landscape and supports the investment-case for companies with robust governance and diversity practices” said Hernando Cortina, head of index strategy at ISS ESG, in a statement.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.