LGBT Investing 101
Companies to avoid as an LGBT investor
 | Written by Tom Yeung, CFA | CDFA Investment Advisor & Fund Manager, Jurnex Financial Advisors |
How to invest responsibly as an LGBT investor? In this article, we cover the 3 key factors to consider when investing. We also highlight 4 companies to avoid in LGBT investing.
Over the past several years, there’s been an explosion of socially-responsible investing funds. These are funds that only invest in certain companies based on corporate social responsibility. And these funds can come in all shapes and sizes. Some funds exclude companies in tobacco and alcohol while others favor companies with good gender diversity.
Invest with pride as an LGBT investor
Yet, LGBT investing has far fewer choices. As of 2019, the LGBT-based ETF $PRID has barely over $2.7 million in assets. The ETF also has some flaws, such as excluding Berkshire Hathaway for its low HRC score, despite its CEO, Warren Buffet, pledging billions of dollars to the pro-LGBT Bill and Melinda Gates Foundation. (In this article, we’ll also cover why Berkshire has such an undeservedly low score)
Boycott companies with irresponsible LGBT practices
It pays to be selective of companies in LGBT investing. That’s because LGBT shareholders can make a difference.
Based on data from the Williams Institute, I estimate that LGBT people in the United States have a combined $2.2-2.5 trillion in personal savings. That’s about equivalent to the annual GDP of California. And that equates to a lot of influence.
Boycotting companies that fund anti-LGBT causes, such as Chick-Fil-A and Hobby Lobby is a great start. But we as investors and savers can take this another step further by boycotting company stock.
How to get started in LGBT investing
If you want to learn more about companies to avoid as an LGBT investor, you’ve come to the right place. In this article, we will first cover the three criteria to use in evaluating companies to avoid. Next, we will cover four examples of companies that you should avoid with LGBT investing. Finally, we’ll wrap up by examining how this style of investing can fit in with your long-term portfolio.
By the end of this article, you should have a good idea of companies to avoid as an LGBT investor.
You CAN make a difference as an LGBT investor.
The 3 criteria of companies to avoid in LGBT investing
When it comes to companies, the level of LGBT support falls across a spectrum. In other words, it’s rarely black-and-white. For example, even though both Target and Walmart have anti-discriminatory policies, Target (under CEO Brian Cornell’s watch) has been far more active in pushing for all-gender bathrooms even in the face of public pushback.
Similarly, companies that don’t support LGBT causes aren’t necessarily evil. But anti-LGBT companies to avoid all have three common factors:
1. Low HRC score
How does the company treat its employees?
Every year, the Human Rights Campaign (HRC) releases a corporate index score for the largest US companies. They actively rate companies based on 4 key criteria:
- Workplace protection: sexual and gender-identity protections
- Inclusive benefits: healthcare, medical leave, gender reassignment coverage
- Inclusive culture: training, performance measurements, diversity council
- Responsible citizenship: charitable giving, shareholder influence
These figures are updated on an annual basis, and provide a good insight into how the companies treat their employees.
Note 1: Companies that don’t respond to surveys are penalized
Here is where HRC scores can fall short. A number of companies choose not to respond to HRC’s surveys. In the case of Berkshire Hathaway, for example, it’s famously hands-off CEO, Warren Buffett, prefers to let his subsidiary’s leaders set their own tone. Berkshire Hathaway, therefore, received a score of just 20/100 in the latest 2019 scores. This is despite Buffett having pledged much of his net worth to the pro-LGBT Bill and Melinda Gates Foundation.
Grayed-out Berkshire Hathaway is the largest company that declined to take part in the HRC survey
Note 2: small companies are overly penalized.
Here is a second area that investors need to take note of. Smaller companies often don’t have the resources to implement HRC’s recommendations. Put another way, a 100-person company will have a harder time maintaining a diversity committee than would a company with 100,000 people. Still, HRC scores will penalize the 100-person company, regardless of how LGBT friendly they actually are. And this is something that investors might not want to do.
HRC scores are still highly valuable
On the flip side, large audited companies with low HRC scores should be viewed with suspicion by LGBT investors. These are companies with the resources to establish LGBT protections but have chosen not to. Companies in this category include names such as Costco (60), Rite Aid (50) and Domino’s Pizza (50).
2. Does the company promote anti-LGBT causes?
Or does the company fund anti-LGBT politicians?
The HRC Index does a good job of analyzing workplace culture. But companies don’t exist in a vacuum. In fact, American companies can be instrumental in setting a cultural tone.
So, as a second point, LGBT investing should also consider the way companies influence the outside world.
Chick-Fil-A, for instance, has donated millions to anti-gay causes, including anti-LGBT marriage and groups that support conversion therapies. It’s founding family has consistently taken an anti-LGBT stance.
When it comes to LGBT investing, you need to check how companies donate money
You might think Chick-Fil-A can get away with it because they’re a private company.
Wrong! A surprising number of public companies also do the same.
Home Depot, for example, donated $1.82 million to 111 anti-gay politicians in 2017-2018, according to website popular.info. This included $20,000 to Doug Collins, a representative from Georgia who opposed the Equality Act, the act that would have expanded the 1964 Civil Rights Act to ban discrimination on the basis of sexual orientation. (Doug Collins received a score of 0 from HRC’s latest scorecard)
So how did Home Depot earn a “90/100” on the general HRC scorecard?
Not only that. Home Depot also earned the HRC’s “Best Places To Work For” award in 2018.
That’s because the HRC focuses on the way companies treat their employees. Savvy LGBT investors should look further afield to check how companies influence their outside world.
Doug Collins scored 0 on HRC’s LGBT scorecard for his anti-LGBT work, yet received significant donations from company PACs.
3. Is the company unapologetic in its behavior?
Does the company intentionally support anti-LGBT causes?
Often, the harm companies do to LGBT causes is unintentional. A company might fund an anti-gay politician to generate goodwill. Perhaps the company wanted a local tax break for building a new plant. This doesn’t excuse their behavior, of course.
But what about companies where LGBT harm is intentional? Where mistakes were made and then the company either 1) refused to apologize, or 2) refused to change.
For example, H&M was confronted last year for producing their pride collection in countries that still criminalize gay sex. But was it deserved? In fact, many other apparel companies also produce in Bangladesh, India, and Myanmar.
H&M, however, decided to continue production in those countries, even after major public backlash.
It’s a nice t-shirt, H&M. But where was it produced?
Anti-LGBT companies to avoid
Now that we have covered the three key criteria of companies to avoid, here are four examples of companies you want to avoid investing in.
1. Urban Outfitters (URBN)
First on our list is Urban Outfitters. Despite its brand positioning as an edgy, new-age clothing retailer, its founder, Richard Hayne, has consistently funded anti-LGBT politicians and causes. This includes $13,000 to Rick Santorum among others.
The company he founded fares no better
His company pulled a pro-gay shirt back in 08, they also blatantly ripped off an Etsy designers work, featured a t-shirt for women that said “eat less” and most recently had a card with a “tranny” slur on in. – Snopes.com
These aren’t one-off problems. The company has a pattern of consistently bad behavior. In 2014, the company was forced to pull bloodied Kent State t-shirts from shelves. Just a year later, they did it again with a tapestry with Nazi-era anti-gay imagery. (Writer note: I wish I were making this up)
Why this is a company to avoid for LGBT investing
- Low HRC score. The company scores 75/100 in an audited HRC score, low for a large public company. The company fails to provide equivalent benefits for same and different-sex domestic partners. They also fail in HRC’s internal training metrics.
- Actively promoting/funding anti-LGBT causes. Richard Hayne has donated to anti-LGBT politicians, gaining the attention of the Washington Post and a change.org petition, among others.
- Unapologetic in behavior. The company has been inconsistent in apologizing for their behavior. But because the company has consistently continued its history of insensitivity, we rate this company as “unapologetic”.
2. Bank of America (BAC)
An example of a company that waves a rainbow flag in one hand and funds anti-LGBT causes with the other.
In 2016, Bank of America famously denounced North Carolina’s anti-LGBT laws while funding the politicians who supported the measure. If passed, the law would have effectively prohibited state and local governments from discrimination based on sexual orientation or gender identity.
Governor Pat McCrory eventually signed an executive order outlawing LGBT discrimination, but not before Bank of America had donated $141,000 to the Republican party and members that were championing the discriminatory bill.
The bad behavior doesn’t end there. The company has since defied critics and sponsored Jair Bolsonaro, an outspoken anti-LGBT figure, for the Brazilian Chamber of Commerce Person of the Year award for 2019. (Delta Airlines and Bain & Co pulled out of the event)
Why this is a company to avoid for LGBT investing
- Low HRC score. The company receives a 75/100 audited score from the HRC, one of the lowest for a Fortune-50 company.
- Actively promoting/funding anti-LGBT causes. The company has donated to the Republican party of North Carolina among other groups that have supported anti-LGBT
- Unapologetic in behavior. The company has continued to back Jair Bolsonaro, who has, among other comments, said he would “rather have a son who is an addict than a son who is gay”
3. GEO Group (GEO)
Perhaps not a household name. But controversial nonetheless.
GEO Group is the largest owner and operator of private prisons in the world. The company has a checkered past with the treatment of both LGBT and straight inmates.
The company is no stranger to controversy.
- Lawsuits: The company has been sued multiple times for forcing inmates to work for food.
- Mismanagement: Its Adelanto facility in LA was named the “deadliest ICE center of 2017“
- Human Rights Abuse: The ACLU has accused the company of torturing inmates in Colorado
LGBT controversies: The company has a particularly checkered past with LGBT people. According to the US Commission on Civil Rights, the GEO Group had failed to protect LGBT people from abuse. The company has also been sued by the Campaign Legal Center for illegal political donations in the 2016 campaign. The lawsuit is still ongoing.
Why this is a company to avoid for LGBT investing
- Low HRC score. The company does not have an HRC score, but Glassdoor reviews suggest very low morale among employees. Common complaints include a top-heavy management structure and rife favoritism
- Actively promoting/funding anti-LGBT causes. The company is a heavy funder of the Republican party
- Unapologetic in behavior. Despite a large amount of negative press, the company has continued to run its prison facilities as though nothing has happened.
4. Philip Morris (PM)
Yet another company with a highly checkered past.
Philip Morris was the first major tobacco company to advertise to the LGBT community, including a campaign where it gave away free cigarettes to LGBT people. Its aggressive marketing tactics have been profound.
A study by the Truth Initiative found smoking rates among LGBT people are 2.5 times higher than rates among straight people. The researchers placed part of the blame on heavy marketing by cigarette manufacturers.
Philip Morris was the dubious leader in aggressive cigarette marketing tactics to the LGBT community. And it worked.
A further study conducted by the Nursing School at the University of California studied data from Philip Morris’ ad campaigns in the early 2000s, and ultimately blamed the tobacco giant as the first company to aggressively market to the LGBT community.
Why this is a company to avoid for LGBT investing
- Low HRC score. Philip Morris has an unaudited score of 10/100, the lowest of the major tobacco manufacturers
- Actively promoting/funding anti-LGBT causes. The company donates heavily to the Republican party in the mid-Atlantic states. (One should note, however, that campaign donations are more pro-tobacco than anti-LGBT).
- Unapologetic in behavior. This is the biggest reason to avoid Philip Morris as an LGBT investor. The company (and the industry) had a long history of either denying or issuing empty apologies for their marketing campaigns. The company has yet to meaningfully amend for its aggressive marketing tactics to the LGBT community.
Conclusion
LGBT investing doesn’t have to be complex. With certain principals in place, it becomes easy for any investor to identify the companies to avoid.
Anti-LGBT companies are often bad investments
Companies that support anti-LGBT often have poor corporate governance. And this matters. If a company has trouble changing for LGBT rights, how can it change for competition?
On the other hand, forward-thinking companies that embrace LGBT rights are often more dynamic. These companies range from tech giants such as Google and Facebook to stalwarts such as Target and Charles Schwab.
I caution people from overcomplicating stock investing. As long as you follow these 3 principals for LGBT investing, it’s hard to go wrong.
Where to find more resources
If you’re looking to revamp your stock portfolio, there’s no better time than now. All it takes is a phone call.
That’s because I’ve invested client money for over a decade in the same old-fashioned way: seek out great companies in good industries, that can be purchased at a discount to their fair value. Sounds too simple to be true? Give me a call today and I’ll show you that it’s still possible after all these years.
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