By Manuel Tovar, July 7 – Hispanic Solutions Group
According to some specialized studies, companies with policies favorable to LGBTQ + have improved the performance of their actions. LGBTQ + friendly investing, investments that focus on companies with lesbian, gay, bisexual, transgender and queer inclusion policies, have attracted increased attention in recent years. Given the growing awareness of these issues, investors have a number of different avenues available to them to support LGBTQ + inclusive businesses.
Whether through mutual funds or individual companies, this is how investors can build an LGBTQ + friendly portfolio.
- LGBTQ + friendly investing focuses on companies that have inclusive employment policies and practices for lesbian, gay, bisexual, transgender, and queer people.
- The Human Rights Campaign’s annual Corporate Responsibility Index, which has tracked the inclusion of LQBTQ + for two decades, is a leading source for measuring non-discriminatory business policies.
- To own shares in LGBTQ + inclusive companies, investors can start by consulting the Corporate Responsibility Index, LGBTQ + friendly indices, ETFs, or socially responsible funds that focus on gender diversity.
- Research has shown that LGBTQ + friendly policies and practices strengthen employee retention and shareholder performance.
Inclusive policies on the rise
LGBTQ + inclusion in the workplace has come a long way in the past two decades. In 2002, the Human Rights Campaign, an LGBTQ + advocacy group, created the Corporate Equality Index to track LGBTQ + inclusive labor policies. Specifically, these policies are relevant to lesbian, gay, bisexual, transgender, and queer (LGBTQ +) employees. When it was first launched, 13 companies achieved a 100% rating on LGBTQ + equality. In the current year 2021, this number reached 767. Worldwide, these companies, which include many companies from Fortune 500, employ 13 million people. At the same time, 71% of Fortune 500 companies have health care benefit policies that include transgender people. To put things in perspective, this number was 0% in 2002. The rise in corporate advocacy for transgender initiatives is an area that has seen some of the greatest progress in the last 19 years. Of course, there is still progress to be made for LGBTQ + protections. But as more focus is shifting to diverse workforces, the impact on employees, productivity, and investors is being understood at a closer level.
Building an LGBTQ + friendly portfolio
There are several ways for investors to create LGBTQ + inclusive portfolios. The Human Rights Campaign’s annual Corporate Equality Index (CEI), which tracks the company’s LGBTQ + policies, is a good place to start. Company scores are based on a scale of 100, and the criteria look at nondiscriminatory gender policies, medical benefits for spouses, training and best practices, and corporate social responsibility, among others.
Other indices also focus on various inclusive LGTBTQ + companies.
Meanwhile, funds that focus on social responsibility may offer other avenues for investors. Although it does not focus exclusively on LGTBQ + friendly investing,
How to Invest in LGBTQ + Friendly Businesses
For investors looking to own shares in LGBTQ + friendly companies, the CEI report from the Human Rights Campaign includes a comprehensive list of such companies in the Fortune 500, along with medium and large public companies. For example, in the 2021 report, seven of the ten largest companies of the aforementioned company scored 100%. It’s worth noting that investors can also do their own research by checking out companies’ websites, which can offer insight into their diversity and inclusion practices.
Why is interest growing in inclusive LGBTQ + companies?
Studies show that LGBTQ + friendly policies have proven their economic value, from employee retention to profitability. For example, in a survey of a specialized company in 2017, 80% of respondents said that inclusion plays an important role in how they choose an employer. Meanwhile, more than 70% of those surveyed said they would consider leaving an organization for one with more inclusive practices. When it comes to profitability, another specialist study found that the worst performing companies in terms of gender and cultural diversity lagged 29% behind in their probability of achieving above-average profits. Parallel to this,
Startup financing trends
Today, most of the seed funding goes to companies run by white cisgender men. This investment financing allows companies to bring their product to market and cover the initial costs of running the business. Because most of this money goes to companies run by white cisgender men, BIPOC, gay and trans people face a barrier to receiving funding. To respond to this problem, New York-based venture capital firm Gaingels invests in LGBTQ + inclusive companies. It also partners with major firms to support ethnic minority businesses and startups and has seen funding grow from $ 5 million to $ 50 million in less than two years, by the end of 2020.
How do LGBTQ + friendly companies perform?
According to research by a specialized entity, companies with socially inclusive and LGBTQ + friendly policies attract talent and have improved stock performance. For example, the LGBTQ-350 index, established by one entity, includes companies with LGBTQ top management and / or companies that are voted by reliable polls as LGBTQ + inclusive. In 2020, the LGBTQ-350 outperformed its benchmark by 6.58%, with a performance of 21.14% compared to 14.29% reported by another company. Although inclusive policies do not directly lead to superior performance, it highlights that LGBTQ + policies and higher returns can occur simultaneously. As is known, both inclusive LGBTQ + policies and financial factors play an interesting role in the overall health of a company.
The LGBTQ100 index also posted higher equity returns. Developed by another specialized entity, based in Los Angeles, the index consists of 100 large-cap companies with leading equality measures in 2020. The index posted gains of 31.52% compared to the returns of the S&P 500 index of the 29.01%. By the end of 2020. Meanwhile, a report from another major company from 2019 suggests that companies that promote diversity and inclusion practices are more profitable. Top-tier companies in gender diversity, for example, were 25% more likely to outperform lower-tier companies. Not only that,
The bottom line
While it is true that there are only a handful of exclusive LGBTQ + funds available to investors, some of the existing options have yielded competitive results. Investors can refer to the Human Rights Campaign’s Corporate Equality Index, released each year, to research LGBTQ + inclusive companies. At the company level, interest in LGBTQ + friendly policies has increased in recent years. One of the many strengths of LGBTQ + friendly companies, according to research, is the competitive advantage seen in talent, acquisition, and financial gains.
Finally, thanks to the multiple forces that continue to elevate diversity and gender inclusion, building an LGBTQ + friendly portfolio is increasingly accessible to investors. This, coupled with increased socially responsible investing (SRI), which can assess companies on inclusive policies, could expand the number of investment options for investors seeking such portfolios.
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