LGBTQ

Socially conscious investing is on the rise. According to a report by the US SIF Foundation, 1 in 4 assets of the $46.6 trillion in investments professionally managed is invested in socially responsible ways.

Why? More than investing for strictly financial purposes, investors are increasingly considering the social impact that their investments can have. It’s more and more common for investors to want their portfolio to be holistic, putting their money to work to support causes they personally care about.

Also known as socially responsible investing (SRI), this trend is described as investing in companies that have firm ethical practices. Investors can participate in SRI on a range of issues that are important to them, from the environment to social concerns. LGBTQ investments, an emerging trend in the space, have the power to support anti-discrimination measures as they relate to gender identity in the workplace.

For the LGBTQ community, the legalization of gay marriage in 2015 changed finances in many households. From taxes, to retirement planning and pensions, marriage equality made partners into formally recognized households and more aligned financial partners.

And, this community has money to invest. According to LGBT Capital, LGBTQ household wealth is estimated at $18 trillion globally, approximately $6 trillion of which is in the United States.

For these reasons and more, investing in companies that are explicitly supportive of the equality of the LGBTQ community is a growing trend that’s here to stay.

What Is LGBTQ Investing?

LGBTQ investing is using investments to advance social equity, specifically by supporting publicly traded companies that support anti-discrimination measures related to sexual orientation, gender identity, and gender expression.

Offerings that have both an ethical and financial concern have a long history and are still expanding.

Environmental, social and governance (ESG) factors address non-traditional issues as a key part of financial analysis. First coined in 2005 by the study “Who Cares Wins,” ESG factors include how a corporation handles environmental stewardship, treats its employees, manages supply chains, and more.

ESG, while newer than Socially Responsible Investment (SRI), builds upon it and states that corporations that practice ESG are better poised to compete successfully. Around the same time of the “Who Cares Wins” report, the UNEP published the “Freshfield Report” which demonstrated more specifically how ESG factors are relevant to financial valuation.

Soon after these reports in 2006, the Principles for Responsible Investment (PRI), a voluntary set of investment principals, were launched by the New York Stock Exchange followed by the Sustainable Stock Exchange Initiative (SSEI) in 2007.

These initiatives speak to the core interest of investors in investing in companies that have values that align with their own.

In the meantime, in 2002, the Corporate Equality Index (CEI) was introduced by the Human Rights Campaign Foundation. Its purpose is to rate the LGBTQ-inclusivity of businesses from 1 to 100. This is a helpful tool both for companies wanting to know how they stack up and investors with a commitment to supporting the advancement of LGBTQ inclusivity.

It’s been shown that companies with more pro-employee policies tend to have better performance, making LGBTQ equality a relevant ESG factor. In this space, specific workplace benefits identified by the CEI include domestic partner benefits, transgender-inclusive benefits, employee resource groups, and public commitment to the LGBTQ community.

According to the CEI 2020 report, 91 percent of Fortune 500 companies (including those who participate in the survey and those that do not) include gender identity protections in their nondiscrimination policies. This is up from just 3 percent in 2002.

And while environmental stewardship might be a more traditional ESG factor, LGBTQ equality is an example of an increasingly relevant and popular ESG factor.

How to Invest in LGBTQ? 

In 2018, UBS launched a fund that matches investors with companies that “respect, protect and encourage their lesbian, gay, bisexual and transgender employees.”

Investment portfolios are increasingly versatile tools depending on investor criteria. LGBTQ investments can be incorporated into portfolios in a variety of ways, from meeting specific criteria to more broadly supporting the community.

According to the Corporate Equality Index (CEI) the top ten companies according to the 2020 index are (1) Walmart Inc., (2) Exxon Mobil Corp. (3) Berkshire Hathaway, (4) Apple Inc., (5) UnitedHealth Group Inc., (6) McKesson Corp., (7) CVS Health Corp., (8) Amazon.com Inc.,  (9) AT&T Inc., and (10) General Motors Co.

The corporate world is becoming more inclusive. Now more than ever, investing in LGBTQ is a matter of choosing to be aware of which companies are explicitly inclusive, and putting your money there.

Of course, investing in companies based on social issues isn’t easy, as different companies take different approaches to these concerns and often their businesses are not directly related to them. However, ETFs and mutual funds focused on social and equality issues are a good way to access this growing sector without having to invest directly in specific companies. A search on Magnifi suggests there are a few different ways to do this.

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The information and data are as of the June 15, 2020 (publish date) unless otherwise noted and subject to change. This blog is sponsored by Magnifi.