Women, Investments & Philanthropy

Transcription

1 Women, Investments & Philanthropy Jaidip Chanda December 6, 2017 This material is solely for the private use of State Street Global Advisors and is not intended for public dissemination. CAM-1535

2 Historical View of Charitable Giving S&P 500 Index Growth (inflation adjusted) Growth in Americans Giving (inflation adjusted) $390B in 2016 Charitable giving was more than 6 ½ times greater and per capita donations were almost 3 ½ times greater in 2014 than in 1954 The Almanac of American Philanthropy 2015.( Source: Giving USA; US Bureau of the Census. 2

3 An Overview of Giving in 2016 Total 2016 contributions by source (by percentage of the total) Corporations 5% 2016 contributions by recipient organization (by percentage of the total) Public 7% Bequests 9% Health 8% Religion 32% Foundations 16% Foundation 11% Individuals 71% Human Services 12% Education 15% Source: 2017 Giving USA CAM

4 Generational Wealth Transfer $12T The Greatest Generation Baby Boomers $30T??? Source: The Sharpe Group, c(3) Charities Heirs/Millennials CAM

5 What the Numbers Say Growth in online giving has recently outpaced overall giving up 9.2% YOY. Technology has increased transparency which helps investors determine their ultimate impact. Significantly more women than men donate to charities and do so more often. Female investors actively seek ways to get more traction and bandwidth in framing the conversation on philanthropy. Assets in socially responsible investment (SRI) strategies expanded from $3.7T in 2012 to $6.6T in That s a market share of $1 in every 5$ under professional management in the US. The next generation of investors is more likely to see socially responsible investing as a natural expression of their own values and beliefs. Millennials place a higher value on making an impact and are investing to pursue values over the long term. 62% of investors believe that philanthropy is important to educate the next generation on family values and legacy why the wealth exists, how to respect it and how to use it wisely. Strategic philanthropy is a way to engage younger generations, through shared values and responsible development. Source: SSGA, as of CAM

6 The Opportunity to Address the Heart of Wealth Management has Never been Greater There are multiple reasons to raise the values-based subject and address the way clients think about, use and allocate their wealth Investment strategies and portfolio optimization Estate planning and the legacy roadmap Intergenerational asset continuity and financial stewardship CAM

7 Perpetuating the Mission Over the Long-term: Millennials and Women are Re-shaping the Approach Millennials are more motivated to give by a sense of purpose and by making an impact globally Sources: (Millennials): State Street Global Advisors Survey, Money in Motion 2015 (Women): US Trust, Insights on Wealth and Worth, 2013 Women are nearly 2x as likely as men to say that giving back is the most satisfactory aspect of having wealth 7

8 Millennials: Empowerment through Participatory Giving Place a higher value on making an impact 57% want to know their charitable "investment" is making an impact And smart charities are answering the call A natural expression of their ideals 67% agree their investment decisions are a way to express social, political and environmental values They re investing their capital and are more open to perpetuating the mission in the long-term Sources: (57%): Blackbaud 2013 Generational Giving Report, How Millennials Are Reshaping Charity And Online Giving on NPR October 13, 2014 (67%): US Trust study, US Trust Insights on Wealth and Worth,

9 Women: More likely to Donate than Men and to Donate More Baby Boomer and older women give 89% more to charity than men their age. And women in the top 25% of permanent income give 156% more than men in that same category. One woman, who graduated from NYU with a degree in game design, became head of her family s donor-advised fund and shifted the focus to advancing women providing grants for women in the area of science, technology, engineering and math, and specifically coding. Being in the field herself, she saw how few women had chosen the same path. She hoped to make a difference with her philanthropy. Wirehouse Managing Director, Philanthropy Program Source: The Women s Philanthropy Institute at the Indiana University Lilly Family School of Philanthropy, Accessed at: 9

10 Women are Playing an Important Role Controls $11T in investable assets and 83% of all consumer purchases Expected to control 2/3 of nation s wealth by in 10 will be sole financial decision-maker at some point in their lives $11T: Daisy Maxey, Where are the Female Fund Managers? The Wall Street Journal, July 6, Accessed at 83%: Who Makes the Call at the Mall, Men or Women? The Wall Street Journal, April 23, 2011, accessed at 2/3: Boston College s Center on Wealth Philanthropy, in 10: Women s Financial Power Grows Faster than Savvy, USA Today, August 17, 2012; basics/story/ /womens-financial-literacy-confidence/ / Image: Sculpture by Kristen Visbal, commissioned by State Street Global Advisors CAM

11 Women Give 2016 Shifts in charitable giving with GenX/Millennials: Married couples whose giving decisions were influenced by women, giving is higher Married couples who give large amounts, women have more influence Women s labor force participation and median earnings have seen a steady increase Source: Women Give 2016, The Women s Philanthropy Institute (WPI) is part of the Indiana University Lilly Family School of Philanthropy 11

12 Gender Differences in Crowdfunding Donors Male and female crowdfunding donors give differently and to different projects % of male/female crowdfunding donors in US who Have given to 6+ projects 17% 9% Have donated $100 or more to a project 22% 12% Have donated to a project to help someone in need 58% 75% Have donated to a project for a new product or invention 27% 42% Have donated to a project for a creative artist 36% 25% Men Women Source: Survey conducted November 24 December 21, Shared, Collaborative and On Demand: The New Digital Economy Pew Research Center 12

13 Technology is a Significant Player Source: Network for Good 2015 Digital Giving Index. 13

14 Advisor-Observed Behavioral Patterns of the Generations Millennials Generation X Baby Boomers More Risk Tolerant 32% 48% 21% Accepting of Non-Traditional Asset Allocation 18% 59% 23% Interest in Ethics and Social Justice 48% 33% 20% Emphasis on Philanthropy 4% 14% 82% Emphasis on Short-Term Rather than Long-Term Gains 46% 33% 21% More Conservative 17% 10% 73% Demand for Personalized Experience and Performance Supporting Objectives 10% 52% 38% Reliance on Technology 81% 15% 4% Concern with Tax Planning Strategies 2% 24% 74% Q: For which of the following three client types are the following factors most commonly reflected? Source: State Street Global Advisors Survey, Money in Motion, June

15 Impact Investing a Growing Trend The total US assets under management using Sustainable, Responsible Impact Investing (SRI) strategies expanded from $3.7 trillion in 2012 to $6.6 trillion in 2014, an increase of 76% Philanthropy today is also more inclusive. It doesn t require an or, it s an and ; an ampersand. People don t have investing and philanthropy separately. There are more opportunities to combine the two through impact investing. Wirehouse Managing Director, Philanthropy Program US SIF Foundation Report on US Sustainable, Responsible and Impact Investing Trends on page 1. Source: The Forum for Sustainable and Responsible Investment, US SIF Foundation Biennial Report on US Sustainable, Responsible and Impact Investing Trends: 2016 Trends Report Highlights 2016,

16 Philanthropy can Strengthen and Transform the Client Relationship in an Extraordinary Way 44% 40% 38% 31% 29% 40% 29% 33% 31% Among investors whose advisor offers philanthropic management, satisfaction with the role their advisor plays is over 48% 50% 52% 58% 58% 46% 54% 46% 46% 80% in all areas except two. Satisfied Very Satisfied State Street Global Advisors Philanthropy Omnibus Survey, ,100 investment decision-makers with $200,000 in investable assets were surveyed nationally. 16

17 More Satisfied Client and a Loyalty Driver Guidance on philanthropy Advisor offers Advisor does not offer Very satisfied Very satisfied Impact Investing 59% Advisor offers 61% Very satisfied 42% 45% Advisor does not offer Very satisfied 44% 48% would like more guidance from their advisor to help define and meet their goals for giving are more likely to stay with an advisor who guided them on their giving plan State Street Global Advisors survey, Money in Motion, financial advisors and 560 individual investors were surveyed nationally. 17

18 The Investment Case for Gender Diversity 18

19 Executive Summary SHE is Leadership SHE seeks investment in companies with higher levels of senior leadership gender diversity SHE is the ticker symbol for the SPDR SSGA Gender Diversity ETF SHE tracks a proprietary index of listed US large-capitalization companies (out of the largest 1,000) that are leaders within their respective sectors in advancing women through gender diversity on their boards of directors and in senior leadership SHE is Influence SHE may inspire conversation and action to increase gender equality in company leadership teams SHE is Impact Representing our commitment to the future of women in leadership, SSGA will direct a portion of the SHE revenue to SHE Impacts (a donor- advised fund) to support charities that seek to remove bias and empower young girls and women to take their place in business leadership Source: SSGA Hunt, Vivian, et al. Diversity Matters. McKinsey & Company. February The methodology used in MSCI s and McKinsey s studies is different than that of the index, and as such, the results of the study should not be viewed as indicative of future performance of the index or SHE. Return on equity is not representative of the performance of any investment or the potential return of any ETF. 19

20 Why Gender Diversity Matters to Investors Research has shown that companies with strong female leadership have performed better (as measured by return on equity) than those without a critical mass of female leaders 1 Return on Equity 7.4% Firms without a Critical Mass of Female Leaders % Firms with Strong Female Leadership +36.4% Higher Return on Equity for companies with strong female leadership compared to companies without a critical mass of women at the top According to a 2015 MSCI study of 4,200 public companies¹ Return on equity is not representative of the performance of any investment or the potential return of any ETF The methodology used in MSCI s study is different than that of the index, and as such, the results of the study should not be viewed as indicative of future performance of the index or SHE For the purposes of the study, MSCI defined strong female leadership as having a board of directors with at least three women, which research suggests comprises a critical mass for decision-making influence, or a percentage of women that s higher than average in the company s country. 1 Lee, Linda-Eling, et al. Women on Boards: Global Trends in Gender Diversity on Corporate Boards, MSCI, November Accessed on February 17, at: Past performance is not a guarantee of future results. 20

21 Why Gender Diversity Matters to Investors Research has show that companies that have increased gender diversity amongst their senior leadership have seen gains in profitability 1 Going from having no women in corporate leadership (the CEO, the board, and other C-suite positions) to a 30% female share is associated with: +15% Increase in Profitability 100 bps Increase in Net Profit Margin According to a 2014 Peterson Institute of International Economics study of 21,980 public companies¹ Profitability and increase in profit margin are not representative of the performance of any investment or the potential return of any ETF The methodology used in this study is different than that of the index, and as such, the results of the study should not be viewed as indicative of future performance of the index or SHE 1 Marcus Noland, Tyler Moran, and Barbara Kotschwar Is Gender Diversity Profitable? Evidence from a Global Survey, Peterson Institute for International Economics, February Accessed on February 19, 2016 at: Past performance is not a guarantee of future results. 21

22 Despite the Benefits, US Companies have a Dearth of Women in Leadership CEOs 4.0% Representation of Women in S&P 500 Companies Board Seats Executive & Senior Level First & Mid Level 36.8% 25.1% 19.2% S&P 500 Labor Force 45.0% The graphic above is for illustrative purposes only and is not drawn to scale. Sources: Catalyst. As of September 30, Catalyst, Women CEOs of the S&P 500 (2015). Catalyst, 2014 Catalyst Census: Women Board Directors (2015). US Equal Employment Opportunity Commission (EEOC), 2013 EEO-1 Survey Data. S&P 500 is owned by S&P Dow Jones Indices LLC. 22

23 Regulation Trending Toward Gender Diversity Around the World Minimum Thresholds on Board Composition (% of Females Required) France Iceland Norway Spain Italy Belgium Germany (Largest 100 companies) Netherlands (Nonbinding) Source: SSGA. As of December 31,

24 New Approaches to Solving the Problem The 30% Club Launched in the UK in 2010 with a goal of achieving a minimum of 30% women on FTSE-100 boards by end of 2015 As of November 2015, the figures stood at 26.1% up from 12.5% ( The Thirty Percent Coalition National US organization of more than 80 members committed to the goal of women holding 30% of board seats across public companies Twenty-seven industry leaders, including senior business executives, national women s organizations, institutional investors, corporate governance experts and board members gathered for a high-level summit in late 2011 to address the lack of gender diversity in corporate boardrooms Prompted by what participants called glacial progress on increasing the number of formed The Thirty Percent Coalition Institutional Investor Influence CalSTRS, CalPERS 131 California companies contacted, 15+ new women board members within 4 months NY City Pension Fund Targeting 24 companies with no or minimal gender diversity on the board Source: SSGA. As of December 31,

25 Exerting Influence Misperceptions still rule at school and in the media By investing in companies with gender-diverse senior leadership, we believe investors may inspire conversations and action to increase gender diversity in company leadership teams 25

26 SHE Details 26

27 Investing with SHE INVESTMENT VIEW GOAL Create a transparent, relatively low-cost vehicle for investors to express their preference for companies with the highest levels within their sectors of gender diversity on their boards of directors and in their senior leadership We believe that female representation at a level which can affect change is important, thus our focus on senior leaders as opposed to company-wide positions We also believe that female representation at the senior leadership level reflects a true commitment to change, as opposed to single figureheads INDEX OBJECTIVE The index is designed to track the performance of US large-capitalization companies that are leaders within their respective industry sectors in advancing women through gender diversity on their boards of directors and in senior leadership positions. The index utilizes transparent rules to identify companies that meet the following criteria: Representation of women at senior management levels assessed relative to their own sectors, and One female that is either CEO, Chairperson, or board member ADDITIONAL INVESTMENT OBJECTIVES Rules-based approach, not an optimization-based approach Source: SSGA. As of December 31,

28 Investing with SHE As an investment vehicle, investors should consider that SHE: SHE seeks to meet the needs of a wide spectrum of investors, from those seeking large-cap core diversification, to impact investors who share a similar passion for gender diversity awareness and value SSGA s charitable component Invests in companies that demonstrate the highest levels of senior leadership gender diversity relative to other firms within their sector Seeks to minimize divergent sector weights versus the 1,000 largest US companies with the goal of isolating gender diversity as the primary factor exposure SSGA has committed to direct a portion of the SHE revenues to charitable organizations that empower women to take their place in business leadership Source: SSGA. As of December 31,

29 Sector Characteristics Limiting active sector weights is challenging as there is significant variation of gender diversity across sectors Female Leadership Across Sectors (Average, 1/2002 to 9/30/2015) Percentage of Females Represented 25% 20% 15% 10% 5% 0% Director Ratio Board Ratio Senior Manager Ratio Executive Ratio CEO Ratio Chairperson Ratio Source: SSGA, BoardEx, FactSet, as of September 30, Sector characteristics are as of the date indicated, are subject to change, and should not be relied upon as current thereafter. Directors include all senior leadership positions including all Board and non-board members and all Senior Managers and all CEOs and Chairpersons. Executives refer to (1) Executive board members that are actually employed at the company (their day-to-day job) whereas non-executive board members are only present on the board plus (2) all Senior Managers. 29

30 Charitable Program 30

31 SHE Impacts Workflow I. Charitable contribution workflow to 3 rd party administrator (501(c)3) STT Revenue Portion of the Advisor s revenue donated Donor-Advised Fund 501(c)3 STT Corp Tax Deduction 3 rd Party/Partner Tax Deduction AUM of Gender Diversity ETF used as barometer State Street Charitable Donation to DAF 3 rd Party/Partner Charitable Donations to DAF II. Charitable donation workflow to end charities Donor-Advised Fund 501(c)3 Private-labeled DAF administered by a 3 rd party $$$ resides in investment pools Due diligence on charities On-line grant making Year-end tax processing Grants directed to vetted charities by Cross-STT Committee Cross-STT committee evaluates strategic fit of charity based on established selection criteria Research conducted on GuideStar/Charity Navigator Committee monitors evaluation and metrics of granted charities End Charities Women for Women International Girl Scouts Girls Who Code Global Women Foundation Michelle R. Clayman Institute for Gender Research Stanford University Source: SSGA Charitable Asset Management. As of December 31, The charities included in the figure above are for illustrative purposes only and may not be representative of the actual charities that receive donations through this charitable contribution. 31

32 Competitive Analysis 32

33 Other Strategies Focused on Gender Diversity COMPETITOR STRATEGY COMPARISON Pax Ellevate Global Women s Index Fund (Mutual Fund) US Trust s Women & Girls Equality Strategy Morgan Stanley Parity Portfolio Barclays Women in Leadership ETN MSCI Women on Boards (WOB) Index Source: SSGA As of December 31, 2015 Invests in companies that are committed to gender diversity on their boards of directors and in executive management and that embrace policies and programs, such as the Women s Empowerment Principles, to elevate women in the workplace Approximately 97% of companies in the Fund have two or more women on their boards, and nearly 70% have three or more Within US equity and taxable corporate fixed income, the fund invests in companies that meet financial fundamentals and have progressive policies relating to women, along with a commitment to use business practices to change the landscape of rights and equality for women Criteria considers a company s track record on hiring, retaining and promoting women; female representation in senior management and on the board; wage parity between women and men; career-advancement opportunities; policies on family leave; supply chain practices and the portrayal of women and girls in advertising A separately managed account for high net worth individuals and institutional clients that focuses specifically on increasing female board representation Composed of companies with a female chief executive officer or companies where women make up at least one-fourth of the board of directors Companies must meet specific market capitalization and trading volume thresholds An exchange traded note (ETN) currently tracks the Index Global and US versions; companies must have 1. At least three female board members OR at least one woman in a current leadership role (e.g., CEO, Co-CEO, Chair, Co-Chair, Executive Chair, Lead Director, or CFO) AND at least one other female director; 2. Percentage of women on board must exceed national average OR 50%; 3. Excludes companies facing Severe and Very Severe Labor Rights Discrimination & Workforce Diversity Controversy Scores Does not neutralize sector overweights, potentially leading to high tracking error versus benchmark Does not include women in senior leadership roles as a criteria Only available at US Trust via an SMA vehicle Does not include women in senior leadership roles as a criteria Does not include women in senior leadership roles as a criteria 33

34 Key Takeaways Frame conversations around philanthropy not just in terms of tax benefits; appeal to investors who want to give back Position philanthropy and mission-based investing as part of a comprehensive wealth management service Research shows that companies that have increased gender diversity amongst their senior leadership have seen gains in profitability and performance 1 1 Marcus Noland, Tyler Moran, and Barbara Kotschwar Is Gender Diversity Profitable? Evidence from a Global Survey, Peterson Institute for International Economics, February Accessed on February 19,

35 Appendix A: Important Disclosures 35

36 Donor-advised Funds Lead the Way Total Charitable Assets in Donor-Advised Funds In Billions $80.00 $70.00 $60.00 $50.00 $40.00 $30.00 $20.00 $10.00 $0.00 $33.60 $38.16 $44.83 $57.34 $70.27 Total Number of Donor-Advised Fund Accounts 300, , , , ,000 50,000 0 $ , , , , , , Source: National Philanthropic Trust The Almanac of American Philanthropy 2015.( Definition: A Donor-Advised Fund is a fund in which donors invest assets they give to charitable organizations. Donors advise the fund on how they want their donations to be used; funds generally comply with donors requests, but they are not obligated to do so. Things not available in previous generations are now commonplace, including today s explosive growth in donor-advised funds. These funds make it so simple and easy to for people to do this kind of gifting. Russell James, Associate Professor- Charitable Planning at Texas Tech University 36

37 Regulatory Impact on Charitable Giving Washington has been favorable to the charitable industry American Taxpayers Relief Act David Camp Bill Estate Tax Changes Appreciated Securities 2 percent floor Extension of April 15 th deadline Pease Limitation Donor-advised fund pay-outs Protecting Americans from Tax Hikes Act Gifts Made Through S-Corporations IRA Charitable Rollover Changes to Charitable Deductions Source: Ropes & Gray and The Sharpe Group CAM

38 Important Risk Disclosures ETFs trade like stocks, are subject to investment risk, fluctuate in market value and may trade at prices above or below the ETFs net asset value. Brokerage commissions and ETF expenses will reduce returns. Frequent trading of ETFs could significantly increase commissions and other costs such that they may offset any savings from low fees or costs. Equity securities are volatile and can decline significantly in response to broad market and economic conditions. Non-diversified funds that focus on a relatively small number of [stocks, issuers, countries] tend to be more volatile than diversified funds and the market as a whole. Passively managed funds hold a range of securities that, in the aggregate, approximates the full Index in terms of key risk factors and other characteristics. This may cause the fund to experience tracking errors relative to performance of the index. Concentrated investments in a particular industry or sector may be more vulnerable to adverse changes in that industry or sector. Gender Diversity Risk The returns on a portfolio of securities that excludes companies that are not gender diverse may trail the returns on a portfolio of securities that includes companies that are not gender diverse. Companies with large market capitalizations go in and out of favor based on market and economic conditions. Larger companies tend to be less volatile than companies with smaller market capitalizations. In exchange for this potentially lower risk, the value of the security may not rise as much as companies with smaller market capitalizations. 38

39 Important Disclosures FOR INVESTMENT PROFESSIONAL USE ONLY. Investing involves risk including the risk of loss of principal. Before investing, consider the funds investment objectives, risks, charges and expenses. To obtain a prospectus or summary prospectus which contains this and other information, call or visit Read it carefully. The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor s particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor. The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA s express written consent. All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such. Standard & Poor s, S&P and SPDR are registered trademarks of Standard & Poor s Financial Services LLC (S&P); Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC (Dow Jones); and these trademarks have been licensed for use by S&P Dow Jones Indices LLC (SPDJI) and sublicensed for certain purposes by State Street Corporation. State Street Corporation s financial products are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates and third party licensors and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability in relation thereto, including for any errors, omissions, or interruptions of any index. Distributor: State Street Global Advisors Funds Distributors, LLC, member FINRA, SIPC, a wholly owned subsidiary of State Street Corporation. References to State Street may include State Street Corporation and its affiliates. Certain State Street affiliates provide services and receive fees from the SPDR ETFs. Web: State Street Corporation All Rights Reserved. State Street Global Markets, LLC, member FINRA, SIPC, One Lincoln Street, Boston, MA Tracking Number: CAM-1535 Expiration Date: November 30, 2017 CAM

40 Appendix B: Biography CAM

41 Biography Jaidip Chanda Jai is a Managing Director of State Street Global Advisors and Head of the firm s Charitable Asset Management & Fiduciary Advisory Services Divisions. Charitable Asset Management is a division of State Street that invests and administers planned giving assets for charitable organizations in the United States. Fiduciary Advisory Services provides Outsourced CIO and customized advisory solutions to defined benefit, defined contribution, endowment and foundation clients. Prior to joining SSGA in 2013, Jai spent 20 years at Fidelity Investments in various institutional sales and relationship management roles. At the Fidelity Charitable Gift Fund, Jai led the fundraising efforts in the institutional marketplace for the largest donor-advised fund in the US Prior to that, Jai spent 12 years at Fidelity Institutional overseeing the firm s largest clearing & custody relationships and being responsible for all sales revenue of third party research content to all Fidelity s institutional clients. His career started in fixed income sales & trading at Bear Stearns and Fidelity Capital Markets. Jai earned an MBA from Boston University and a BS from the University of Vermont. Jai is on the Board of Overseers for Beth Israel Deaconess Medical Center. He is also a board member of Inversant and the Boston Estate Planning Council. He holds FINRA Series 7 and 63 licenses. CAM