It's becoming easier, as more corporations adopt socially inclusive policies
Part of the Series Guide to Finance for LGBTQ+ People Guide to Finance for LGBTQ+ People Personal Finance
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- Investing in LGBTQ+ Friendly Investments CURRENT ARTICLE
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- LGBTQ+ Elder Care in Retirement
LGBTQ+-friendly investing focuses on companies with strong lesbian, gay, bisexual, transgender, and queer-inclusive policies. This investment strategy has attracted increased attention in recent years and more information on individual companies’ practices is becoming available to guide investors in their choices. Here is how investors can build an LGBTQ+-friendly portfolio today.
Key Takeaways
- LGBTQ+-friendly investing focuses on companies with inclusive workplace policies for lesbian, gay, bisexual, transgender, and queer-identifying people.
- The number of companies with LGBTQ+ inclusive practices has increased dramatically since 2002.
- The Human Rights Campaign Foundation's Corporate Equality Index, which tracks LGBTQ+ inclusivity, is a leading source for assessing nondiscriminatory company policies.
- Research shows that LGBTQ+-friendly policies and practices strengthen employee retention and can sometimes lead to higher investment returns.
Inclusive Policies on the Rise
LGBTQ+ inclusivity in the workplace has come a long way in the past 20 years. The Human Rights Campaign Foundation, which is an LGBTQ+ advocacy group, created the Corporate Equality Index in 2002 to track LGBTQ+ inclusive workplace policies. These policies are specifically relevant to lesbian, gay, bisexual, transgender, and queer (LGBTQ) employees.
When it was first launched, 13 companies achieved the highest rating on LGBTQ+ equality. In 2023-2024, this number reached 842. These companies, which include many Fortune 500 businesses, employ more than 39 million people globally. And 73% of Fortune 500 companies now offer transgender-inclusive health insurance coverage. To put things in perspective, this number was 0% in 2002. The rise in support for transgender initiatives is one area that has seen some of the greatest progress over 20 years.
Of course, there is still progress to be made for LGBTQ+ protections. But as an increased focus is directed toward diverse workforces, the benefit to employees, productivity, and investors is being understood at a closer level.
How to Build an LGBTQ+ Friendly Portfolio
There are a number of ways for investors to build LGBTQ+ inclusive portfolios. The Human Rights Campaign’s annual Corporate Equality Index, which tracks company LGBTQ+ policies, is a good place to start. Company scores are based on a scale of 100, and criteria include nondiscrimination gender policies, spousal medical benefits, training, best practices, and corporate social responsibility (CSR), among other factors.
Funds that put an emphasis on social responsibility may provide other avenues for investors. Although not exclusively devoted to LGBTQ+-friendly investing, the following funds consist of companies that support gender diversity, according to Forbes:
- SPDR SSGA Gender Diversity Index ETF (SHE)
- Vanguard FTSE Social Index Fund Admiral (VFTAX)
- iShares MSCI KLD 400 Social ETF (DSI)
- AXS Change Finance ESG ETF (CHGX)
- Vanguard ESG U.S. Stock ETF (ESGV)
How to Invest in LGBTQ+ Friendly Companies
For investors who are looking to own individual shares in LGBTQ+-friendly companies, the Human Rights Campaign’s CEI report lists many such companies in the Fortune 500, along with mid- and large-size public companies. For instance, in the 2023-2024 report, 15 of the top 25 Fortune 500 companies achieved ratings of 100%, including:
- Walmart (WMT)
- Amazon (AMZN)
- Apple (AAPL)
- CVS Health Corp. (CVS)
- UnitedHealth Group (UNH)
It’s worth noting that investors can (and should) also do their own research by reviewing company websites, which may offer insight into their diversity and inclusion practices. These are often found on the “careers” or “culture” pages. You can also review ratings on Glassdoor.com. Doing so could pull back the curtain on company policies in action (or the absence of such policies) as employees see them.
Fast Fact
LGBTQ+ businesses add an estimated $1.7 trillion to the U.S. economy, according to the National LGBT Chamber of Commerce.
Benefits of Investing in LGBTQ+-Friendly Companies
Studies show that LGBTQ+-friendly policies have proven their economic worth—from employee retention to profitability. For example, in a Deloitte survey, 80% of respondents said that inclusion plays an important role in how they choose an employer and more than 70% said they would consider leaving an organization for one with more inclusive practices.
A separate study on workplace inclusion reported a 56% jump in performance when employees felt as though they belonged. In addition, turnover risk was cut in half and sick days dropped by 75%.
When it comes to profitability, one study from McKinsey found that the worst-performing companies in terms of gender and cultural diversity lagged by 29% in their likelihood of achieving above-average earnings.
Startup Funding Trends in LGBTQ+ Companies
Only a small percentage of startup funding (0.5%) is directed to companies with LGBTQ founders, according to the StartOut Index. That compares with 7.1% of the population who identify as LGBTQ, it adds.
To help address this problem, at least one venture capital firm, New York–based Gaingels, invests in LGBTQ+ inclusive companies. It also partners with firms such as Harlem Capital to support ethnic minority-led companies and startups. As of 2023, Gaingels and its partner investors had invested a total of more than $800 million.
How LGBTQ+-Friendly Companies Perform Financially
The McKinsey report found that in 2019, companies in its top quartile for gender diversity in their executive teams were 25% more likely to show above-average profitability than those in the fourth quartile.
Other results have been mixed. The MSCI USA Gender Diversity Select Index/SSGA Gender Diversity Index, for example, returned 5.05% in a five-year period ending in April 2024 vs. 9.42% for the S&P 500 Index. (The MSCI USA Gender Diversity Select Index "is designed to represent the performance of those companies that exhibit a commitment towards promoting and maintaining a high level of gender diversity across the different levels within their organization, including their corporate board, executive and senior management, and workforce," according to MSCI, its creator.)
Where Can I Find LGBTQ+-Friendly Investments?
A good starting point would be the Human Rights Campaign Foundation's Corporate Equality Index, which tracks LGBTQ+-friendly policies at major U.S. companies.
What Are Some Examples of LGBTQ+-Friendly Companies?
The Human Rights Campaign Foundation's Corporate Equality Index for 2023-2024 listed 545 companies that had received 100% scores for their nondiscriminatory policies. Some well-known names are mentioned above. Half a dozen others include:
- American Airlines (AAL)
- Colgate-Palmolive Co. (CL)
- Ford Motor Co. (F)
- IBM Corp. (IBM)
- Levi Strauss & Co. (LEVI)
- Walt Disney Co. (DIS)
What Does ESG Mean?
ESG stands for environmental, social, and governance, three broad criteria that are often used to assess companies in ways that go beyond their financial performance. A company's track record on LGBTQ+ issues could be one factor in the latter two categories.
The Bottom Line
Thanks to the multiple forces that continue to elevate the importance of gender diversity and inclusion in the workplace, building an LGBTQ+ friendly portfolio is becoming more accessible to investors. The Human Rights Campaign Foundation's Corporate Equality Index is one good source of information for investors looking for LGBTQ+ inclusive companies. Employee reviews on Glassdoor.com can be another. And given the growing interest in the topic, additional resources—and specialized investment vehicles—are likely on the way.