How ESG celebrates & supports the LGBTQ+ community (2024)

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Strong diversity and inclusion policies bring lasting social benefits, especially when it comes to the LGBTQ+ community. These benefits hold value for customers, employees, investors, and other key stakeholders who identify as LGBTQ+.

Research has linked diversity and inclusion to creativity, innovation, and financial performance. Companies with greater gender diversity have a 25% higher chance of exceeding their competitors’ financial performance, according to a McKinsey report. Ethnic diversity brings an even greater advantage with a 36% chance of surpassing the competition.

A Credit Suisse study analyzing the relationship between LGBTQ+ diversity and financial performance identified a positive correlation. A basket of 270 companies supporting LGBTQ+ diversity, the LGBT 270, outperformed the MSCI World index by 3% each year for six years.

This shows that ESG investing and corporate social responsibility could play important roles in advancing the interests of the LGBTQ+ community.

Pink money's growing influence

In financial terms, people identifying as LGBTQ+ hold a lot of sway with an estimated $3.6 trillion in purchasing power in the US, according to a 2019 LGBT Capital study. The research also shows LGBTQ+ individuals have an estimated $6.9 trillion in US household wealth and $23 trillion in global household wealth.

This monetary influence could grow in the future, since a higher percentage of people belonging to younger generations identify as LGBTQ+ than those of older generations. In the US, 8% of baby boomers, 20% of millennials, and 31% of Gen Z centennials (born after 1997) consider themselves non-binary.

This combined wealth is often called “pink money,” referring to the pink triangle used by Nazis to identify hom*osexuals during the Holocaust. LGBTQ+ communities have been known to wield influence with their pink money through donations to political campaigns. President Obama received $1 million in donations in just 90 minutes after he announced his endorsem*nt for same-sex marriage in 2012.

Three years later, the Supreme Court legalized gay marriage in 50 states in 2015. The legal decision reflects significant social progress since the Stonewall Uprising in Greenwich Village in 1969, which we remember each year during Pride Month. One year later, the Pulse Nightclub shooting in 2016 stood in stark contrast to the Court’s positive decision. All these events serve as important reminders that safety, health, and anti-discrimination policies remain important priorities for the LGBTQ+ community.

ESG investing for LGBTQ+ diversity and inclusion

ESG investment offers an attractive way for the LGBTQ+ community to use its combined wealth to support corporations with strong diversity and inclusion policies. At least one ETF now exists to help investors prioritize social responsibility for the LGBTQ+ community in their investments.

Recently, the LGBTQ + ESG100 ETF (LGBT) launched to track an index of 100 large-cap companies created by LGBTQ Loyalty Holdings. The companies included in the index have policies supporting equality for gender and sexual orientation. This ETF fills the gap left by a similar ETF which closed in 2019, UBS’s Insightshares LGBT Employment Equality ETF (PRID).

In addition to the LGBT ETF, a number of resources for ESG investors exist to help them evaluate corporate policies to help them select investments.

Human Rights Campaign has been scoring companies on criteria for advancing the rights of non-binary individuals in the workplace in its Corporate Equality Index since 2002. These criteria include non-discrimination policies for sexual orientation and gender identity, benefits for transgender individuals and domestic partners, organizational LGBTQ+ competency, and public LGBTQ+ support.

The LGBT Great report, A New Frontier: LGBT+ Lens Investing for the 2020s, highlights the important link between corporate sustainability and LGBTQ+ inclusion. Another report from Trillium, Investing in Equality, identifies ways to integrate LGBTQ+ issues into investing portfolios with the key pillars of increasing access to capital, workplace equity, and products and services.

Both reports aim to advance ESG strategies in support of the LGBTQ+ community. This research not only helps investors develop frameworks for comparing organizational performance related LGBTQ+ issues; it spurs corporate ambition towards achievement in this area.

Beyond rainbow capitalism: ESG best practices for supporting the LGBTQ+ community

Diversity and inclusion for LGBTQ+ doesn’t just mean waving a rainbow-colored flag, as the backlash against “rainbow washing” and “rainbow capitalism” has shown.

For instance, an organization may only donate a small percentage of sales for rainbow-themed promotions to organizations supporting LGBTQ+ communities. They might use messaging in support of Pride in their social media marketing without any real policies to back up their statements.

One in ten LGBTQ+ people actively avoid Pride themed products because they feel these products exploit their identity, according to a Reboot Online study.

In contrast, many companies have existing policies which provide concrete evidence of their support for the needs of LGBTQ+ interests and workers. According to a Trillium case study, Microsoft was the first Fortune 500 company to provide domestic same sex partners the same health benefits as their employees in 1993. It now offers transgender employees comprehensive health benefits covering transition-related expenses.

When companies make strides like this, they often voluntarily surpass their legal obligations to their employees. Currently, fewer than half of the states legally prohibit discrimination based on sexual orientation and the same is true for discrimination based on gender and identity.

To improve both the data on diversity and inclusion and to increase the visibility of its LGBTQ+ employees’ identities, IBM implemented a self-id program to allow its LGBTQ+ employees to add their sexual orientation and gender identity to their human resources file. As one of the first companies to implement this practice and allow employees to choose their preferred pronouns, IBM established an important precedent for other companies to follow.

These are just a few examples of ways that companies have supported their LGBTQ+ employees. A holistic approach to social responsibility for the LGBTQ+ community involves a broader review of the policies, marketing, products and services, and community activities of an organization. Out and Equal, a non-profit partnering with Fortune 500 companies to foster workplace quality for non-binary individuals has established best practices for LGBTQ+ diversity and inclusion for workplaces to strive towards. These range from anti-discrimination policies to ensuring accessible, non-gendered facilities and inclusive language in corporate communications.

Pride month is an excellent time for organizations to celebrate diversity of gender identity and sexual orientation by improving their ESG performance. There are a number of ways companies can update their policies regarding LGBTQ+ performance today:

• Review existing research on best practices
• Evaluate the LGBTQ+ inclusivity of products and services
• Engage LGBTQ+ stakeholders directly to identify their needs
• Benchmark performance using KPIs
• Engage with LGBTQ+ networks, allies, and communities through support to partnering organizations

Prioritizing LGBTQ+ diversity and inclusion as part of an existing ESG strategy is a great way to show corporate Pride this month.