When building an investment portfolio, you want to buy assets that could provide a better return on your money. But investing can also—and perhaps should—reflect your values, like supporting the LGBTQ+ community.
Investing in companies with lesbian, gay, bisexual, transgender, and queer-inclusive policies has attracted increased attention in recent years. Given the growing awareness of these issues, a number of different avenues are available for investors to support LGBTQ+ inclusive companies.
LGBTQ-Inclusive and Socially Responsible Investing are Growing Trends
Socially Responsible Investing (SRI)—sometimes known as sustainable, responsible, or impact investing—attempts to allow you to maintain your personal values and goals by investing in companies that reflect those same beliefs. While data on LGBT-specific investment is not widely available, analysts say it is part of a wider trend toward environmental, social and governance (ESG) investing, such as avoiding fossil fuel companies.
ESG investment in Europe, the United States, Japan, Canada, Australia and New Zealand hit $30.7 trillion in 2018, up by more than a third in two years. The trend shows no signs of subsiding anytime soon. Research further indicates that 85% of the general population and 95% of the millennial population are interested in sustainable investing.
How to Find Investments that Support the LGBT Community
Here’s how you can allocate your investment dollars to support LGBTQ+ equality while also working toward the returns you need for your financial goals.
Corporate Equality Index
Many financial advisors recommend you start your search for investments that support the LGBT community at Human Rights Campaign's Corporate Equality Index (CEI). The Human Rights Campaign developed this index in 2002 and has been updating it annually since. Almost 800 businesses earned the top score in 2021.
The CEI rates businesses' LGBT-inclusivity on a 100-point scale and provides some great insight as to whether companies are meeting the needs of the LGBTQ+ community with robust workplace policies. These include clearly defining sexual orientation and gender identity in their non-discrimination policies, granting benefits to domestic partners, offering transgender-inclusive benefits, displaying organizational LGBTQ+ competency, and implementing non-discrimination standards for contractors and suppliers.
Credit Suisse Report on LGBT Investing
A report from Credit Suisse examines the relationship between diversity, especially LGBT-friendly practices, and investment performance. It suggests that diversity initiatives—including an active pro-LGBT culture—is associated with higher stock returns.
Trillium Investing in Equality Report
Another report explains how to support LGBT-inclusion while investing in publicly traded companies. It includes case studies of companies that have dealt with LGBT-related challenges.
Research Individual Companies
Once you’ve narrowed down a list of potential investments that align with your goals and interests, check out each company’s website or Glassdoor reviews. You’ll likely find information about policies and inclusion efforts in a company’s careers or company culture section. These can help reinforce a commitment to inclusive policies or expose gaps that might be deal breakers for your investment dollars.
While popular companies you might have heard of might rank high on equality, their inclusion isn’t an endorsement to purchase them. Instead, this listing should start your creative wheels spinning and inspire thoughts of other companies you know. From there, you can research to see if your favorite company is well-rated in LGBTQ+ advocacy.
How Do LGBTQ+ Inclusive Investments Perform?
Studies show that LGBTQ+ friendly policies have proven their economic worth—from employee retention, to profitability. A recent study suggests that diversity and inclusion initiatives pay serious dividends for the companies that invest in them. The 2019 report found that:
- Companies in the top quartile for gender diversity were 25% more likely to experience higher profitability than fourth quartile companies.
- Companies in the top quartile for racial and cultural diversity outperformed fourth quartile companies by 36% in profitability.
Looking specifically at the LGBTQ+ community, one report from Credit Suisse found that a basket of 270 LGBT-friendly stocks outperformed its benchmark by 6.58%—returning 21.14%, compared to 14.29%. Stronger share returns were also seen by the LGBTQ100 Index. Developed by Los Angeles-based LGBTQ Loyalty, the index consists of 100 Large Cap companies with leading equality measures. For the 18-month period from November 2019 to April 2021, the Index generated a 43.84% return versus a 37.65% return for the S&P 500.
Thus, investments in companies investing in cultural diversity through LGBTQ-inclusive policies appear to have a higher likelihood of outperforming their less inclusive peers. Although, investors should note that this doesn’t mean there is a causal relationship between investment performance and company policies. However, inclusive policies can create higher employee satisfaction, decrease turnover and improve a company’s overall performance in the marketplace—all of which ultimately contribute to a company’s profitability.
The Bottom Line
Some LGBTQ+ investors may worry that investing with their values could limit the return potential of their portfolio. While there are just a handful of LGBTQ+ exclusive funds available for investors, some of the existing options have returned competitive results. Thanks to the multiple forces that continue to elevate gender diversity and inclusion, building an LGBTQ+ friendly portfolio is becoming more accessible.
This accessibility—coupled with the rise in SRI and ESG, which may screen companies on inclusive policies—could expand the number of investment options for investors seeking such portfolios. Whether you’re looking to invest on your own or through a company-sponsored retirement plan, your financial advisor can help align your portfolio to invest in companies that support your values.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
SRI and ESG investing has certain risks based on the fact that the criteria excludes securities of certain issuers for non-financial reasons and, therefore, investors may forgo some market opportunities and the universe of investments available will be smaller.
CFP®, AIF® Peter has more than 10 years of experience in the financial services industry, specializing in working with physicians and medical practices on their unique needs in the changing medical landscape. He also enjoys helping busy professionals in establishing their planning strategies, families saving towards education and retirement goals and individuals managing risk and expenses during retirement. Peter currently serves as Vice President with the Enright Melanoma...Read More