Outsized opportunity: Why investors should care

Despite representing nearly 8% of the US population, LGBTQ+ individuals remain significantly underrepresented in corporate leadership and venture capital funding. This exclusion overlooks the substantial benefits of LGBTQIA+ inclusion in commercial, social, and civic society. Studies suggest a correlation between greater social inclusion of LGBTQIA+ individuals and advancements in innovation and economic development. For instance, research indicates that LGBTI inclusion can boost a country’s GDP by 1% or more, and states with higher LGBTQ+ populations often experience higher Gross State Product growth rates.

LGBTQIA+ exclusion has significant economic consequences

The financial exclusion of LGBT individuals has hindered economic growth due to inefficiencies like lost labour time, reduced productivity, and underinvestment in human capital. Studies in North Macedonia and Serbia estimate economic losses of $64 million and $293 million, respectively, due to labour market discrimination based on sexual orientation, gender identity, gender expression, and sex characteristics (SOGIESC). A 2014 World Bank study modelled the impact of employment discrimination and health disparities for LGBT people in India, calculating a $1.2 to $26 billion hit to the national economy.

LGBTQIA+ inclusion and leadership is linked to positive performance and returns

Research consistently shows that diverse teams enhance decision-making and financial performance. While limited research exists on LGBTQ+ individuals in senior management, one study found that firms with known LGBT executives outperform those without. A 2023 study revealed that stocks led by LGBT CEOs significantly outperform the market. Additionally, inclusive policy interventions, such as LGBT-inclusive policies, correlate with higher stock returns and market valuations. Investor actions, including investment or divestment, can influence firm value and drive change.

Strong investor demand for LGBTQIA+ equity and inclusion will continue to grow

Current trends indicate a growing demand for investments promoting LGBTQIA+ equity and inclusion, particularly among younger investors. As of 2024, the LGBTQ+ community represents nearly 8% of the US population, a proportion expected to rise. The LGBT Capital estimated the community’s 2023 US spending power at $1.4 trillion, highlighting a substantial and expanding market. Despite significant interest, investment offerings meeting this demand remain limited.

Outsized impact: How finance can advance and assess LGBTQIA+ equity

Investors have a unique opportunity to leverage capital flows to effect systemic change and advance social progress. This report recommends a system-level approach to address LGBTQIA+ inequity, setting goals such as promoting equity in corporations and financial institutions, increasing access to capital, improving financial outcomes for LGBTQIA+ founders, developing equitable social structures, driving financial inclusion, and enhancing data collection on LGBTQIA+ progress. Investors can extend existing portfolio management tools and adopt advanced techniques to achieve these goals.

Conclusion

The report concludes by emphasising the need for a shift in public policy and investment practices to address the systemic inequities faced by the LGBTQIA+ community. It calls for a system-level investment approach and intentional corporate and financial practices that support LGBTQIA+ equity. By dismantling discriminatory structures, the financial community can unlock the economic potential of LGBTQIA+ individuals and drive social and economic prosperity.