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Guide to LGBTQ+ friendly investing

Guide to LGBTQ+ friendly investing
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Beyond race, ethnicity, and gender diversity, leading organizations are embracing policies that protect human rights for lesbian, gay, bisexual, trans and queer (LGBTQ+) employees. And those efforts appear to be paying off.

Research shows that by harnessing everyone’s talents, ideas and unique experiences, these organizations benefit from the collective ingenuity that only a diverse workforce can bring – with those initiatives translating to greater returns. According to a recent study by Bloomberg, global investments in strong environmental, social and governance (ESG) practices could reach $53 trillion by 2025, up about 132 percent from 2016 levels.

This handy guide outlines some of the opportunities available for investors who are ready to support the companies that create long-term value for all.

Investing in the LGBTQ+ community by the numbers

Mounting evidence reveals that corporations with solid societal and environmental principles have higher customer loyalty, manage risk better, and generate more significant competitive advantages.

For example, research by Bank of America’s Merrill Lynch shows that firms with strong ESG practices tend to produce higher three-year returns, are less likely to have significant price declines on their shares, and have a lower chance of declaring bankruptcy. These characteristics are attractive to investors.

Last year, investors’ support for causes like LGBTQ+ rights and other ESG initiatives prompted ESG exchange-traded funds’ investments to rise by more than $121 billion, expanding for 38 straight months, according to Bloomberg.

And there are plenty of other statistics that support this trend, including:

  • The LGBTQ100 index, a benchmark tracking the most equality-driven organizations in the U.S., posted a cumulative five-year return of 152 percent, compared to a gain of 113 percent for the S&P 500 index through the end of 2021.
  • 56 percent of global exchange-traded funds (ETFs) investors intend to add exposure to ESG funds in 2022.
  • Globally, LGBTQ+ consumers make up between 5 and 10 percent of the population and have an estimated purchasing power of $5.6 trillion.
  • 90 percent of Gen Z-ers in the U.S. – the newest generation of workers – believe companies should take action on social and environmental issues, and 83 percent see a company’s purpose as a deciding factor in choosing where to work.
  • 83 percent of Fortune 500 companies have incorporated some form of non-discriminatory policies to include gender identity compared to only three in 2000.

Source: LGBTQ Loyalty, Brown Brothers Harriman, Credit Suisse, Porter Novelli and Cone Communications

Building an LGBTQ+ friendly portfolio

For those looking to invest in the corporations with the most progressive policies for LGBTQ+ employees and their families, the Human Rights Campaign Foundation, a non-profit organization advancing LGBTQ+ rights, has built an equality index.

To become part of the index, corporations must achieve a perfect score on metrics such as employment protection, health care benefits, employee recruitment and advancement, philanthropic endeavors, and other categories.

Among the firms included in the 2022 index, a record 842 companies received a top score of 100 percent for their commitment to LGBTQ+ workplace equality, including Comcast NBCUniversal (CMCSA), Microsoft (MSFT), Walt Disney (DIS), Alphabet (GOOGL) and Target (TGT).

Another great resource is the LGBTQ100 index mentioned above, which tracks the performance of the largest U.S. publicly traded companies with the most advanced ESG policies. Some of the companies that make up the benchmark include Mastercard (MA), Visa (V), UnitedHealth (UNH), Coca-Cola (KO) and Amazon (AMZN).

With the rise of technology, investors also have access to automated ESG investing through robo-advisors. These algorithm-driven tools can sift through hundreds of available investment options to surface those most aligned with your values.

Plus, digital platforms like YourStake, a public benefit corporation, let financial advisors analyze investment portfolios to determine how investments measure up against more than 50 social responsibility factors.

Still, many investors prefer searching websites like Glassdoor to review employees’ experiences with those companies that claim to be LGBTQ+ friendly.

ESG-conscious ETFs and mutual funds

Despite the popularity of ETFs and mutual funds, there aren’t any investment vehicles explicitly focusing on the LGBTQ+ community. Instead, many asset managers consider broader ESG practices as the main criteria.

State Street Global Advisors, for example, manages the SPDR SSGA Gender Diversity Index ETF (SHE), tracking an index of U.S. large-cap companies with a high proportion of women in executive roles. Some of the top holdings include Salesforce (CRM), Intel (INTC), McDonald’s (MCD), Bristol-Myers Squibb (BMY) and Netflix (NFLX).

Other examples of popular ESG funds include:

  • Vanguard FTSE Social Index Fund Admiral (VFTAX)
  • Vanguard ESG U.S. Stock ETF (ESGV)
  • iShares ESG Aware MSCI USA ETF (ESGU)
  • TIAA-CREF Social Choice Equity Fund (TISCX)
  • Parnassus Core Equity Fund Investor Shares (PRBLX)

Finding an LGBTQ+ friendly financial advisor

Regarding financial decisions, members of the LGBTQ+ community can benefit from partnering with an advisor who understands their identity, priorities and distinctive needs. For instance, domestic partnerships carry different laws than traditional marriages, while workplace discrimination can impact investment and retirement choices. So choosing the right advisor is essential.

To help you in your search, we’ve developed a comprehensive guide on how to choose a financial advisor. These criteria are valid for all investors.

You can also use resources like the National Association of Personal Financial Advisors to look for businesses serving LGBTQ+ people and their families. Some advisors even have special training in LGBTQ-related issues.

Additionally, your network can be an excellent resource for advice and referrals. Ultimately, the more questions you ask and the more information you gather, the greater control you’ll have over your financial future.

Bottom line

In the not-too-distant past, LGBTQ+ people struggled with inclusion, living in fear of what could happen if they revealed their identity. LGBTQ+ rights have since evolved over the past two decades, opening doors of opportunity to this vibrant community.

Although there’s much work to be done, there has never been a better time for investors to back the corporations setting the stage for equality.

Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.

Written by
Giovanny Moreano
Contributing writer
Gio Moreano is a contributing writer, covering investment topics that help you make smart money decisions. Formerly an investing journalist and lead analyst for CNBC, he is passionate about financial education and empowering people to reach their goals.
Edited by
Managing editor