Investing for LGBT equality – a new frontier for responsible investors? 725 482 Moxie Future

Investing for LGBT equality – a new frontier for responsible investors?

Over the last decade, LGBT rights have moved to the forefront of dialogue on equality and rapid progress has been made on a range of anti-discrimination measures. In many countries this is reflecting a generational change in public attitudes toward LGBT issues. At the same time, responsible investors are increasingly seeking investment opportunities that align with their values and have positive social impact – including investing in LGBT equality.

Is investing in LGBT equality the next frontier?

Considering LGBT issues in investment decision-making is still a relatively new concept, but it is becoming increasingly important, both to support the progress in equal rights and to minimize investment risks brought on by discriminatory business practices.

A study by Denver Investments identified “a long-term trend toward outperformance of companies relative to their respective sector peers after adopting LGBT-inclusive workplace policies.” This is aligned with growing evidence that having diverse points of view creates better outcomes and enhances corporate performance. This includes new research by McKinsey & Company, which finds that companies with more diverse workforces perform better financially.

So it makes good business sense

In response, more and more businesses have begun to pay attention to LGBT issues. Many companies are making sure that their workplaces are LGBT-friendly in order to attract and retain the best talent. Inclusive work environments are now often seen as a competitive edge that leads to higher job satisfaction and greater commitment from LGBT employees.

But it is also about consumers. The global spending power of LGBT consumers was estimated at $3.7 trillion in 2015, according to the most recent data by LGBT Capital, an investment management and advisory group. LGBT household wealth is estimated at $15 trillion globally, and more than $5 trillion in the U.S. alone. China is estimated to have an LGBT population of more than 80 million. Workplace discrimination toward LGBT people could therefore result in a reputation crisis for the company, potentially translating into significant loss for the business.

Using investment decisions to promote LGBT equality

The decisions investors make influence business practices. And some investors are pushing forward to identify and leverage investment opportunities in LGBT issues, seeking both positive impact and financial return. It is clear that action is happening.

In 2016, Trillium Asset Management released an important white paper that outlined an emerging framework to enable impact investors to integrate LGBT issues into investment considerations across a spectrum of asset classes. Rather than focusing on a single fund or strategy, Total Portfolio Activation provides investors with tools to identify investment opportunities that are not yet explicit.

Furthermore, indices such as Denver Investments’ Workplace Equality Index and the Human Rights Campaign’s Corporate Equality Index identify companies based on indicators that point to supportive and fair workplace policies. These tools are useful for investors who value diversity criteria in their investment selection. They can also include these factors in their selection of investment managers and financial consultants, ensuring that they have diverse teams.

Investors creating positive change for LGBT inclusivity

Microsoft is a good example of corporate leadership on LGBT issues. The company is ranked as one of the “Best Places to Work for LGBT Equality”, having consistently received high scores on the Human Rights Campaign Corporate Equality Index over the last decade.

One of the keys to its success is its engagement with its employees and shareholders to advance LGBT rights. Its strategy of constructive dialogue with investors has resulted in the expansion of the company’s nondiscrimination policy.

These kinds of developments demonstrate the role that investors can play in improving diversity within the companies they invest in. Through using multiple lenses in the investment decision-making process, responsible investors can better seek out companies that actively strive to be LGBT inclusive.

Business can and should lead the global effort to achieve equal rights for LGBT people. Through their global footprints, multinational companies are uniquely positioned to expand equality and access to opportunity for LGBT people worldwide. Each year more and more companies are seizing this historic opportunity, recognizing that global LGBT inclusion, particularly at the most senior level of executive leadership, is not only the right thing to do, but also powerfully and positively affects business results.

Todd Sears, Founder, Out Leadership

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