Socially conscious investors are starting to browse through focused ETF plays as a way to combine their beliefs with an investment objective.
For example, the InsightShares LGBT Employment Equality ETF (NYSEArca: PRID) is among a new breed of socially responsible investments. Specifically, PRID includes large- and mid-capitalization U.S. stocks of companies with workplaces that promote and provide equality for lesbian, gay, bisexual and transgender, or LGBT, employees based on their score in the Human Rights Campaign Foundation’s Corporate Equality Index.
“It’s an investment in companies that are most supportive of workplace equality for the LGBT community,” Richard Cea, Head of InsightShares at UBS, said at the 2018 Morningstar Investment Conference.
However, some are concerned that they may be giving up performance to achieve this sense of social equality.
“It’s such an incorrect way to think about things, right, and of course people think, ‘Oh, if I do good, I must be giving something up,’ but this product is designed to do both: One, social good by encouraging companies to be more supportive of LGBT equality. But two, we found – and there’s many studies that show in McKinsey reports and actually the performance of the fund so far – that companies that have a more diverse workforce actually perform better over the long run,” Cea said.
Component companies included in the index will be rated on how the company’s policies address non-discrimination against employees based on sexual orientation or gender identity; the extent to which the company provides equitable benefits to LGBT workers and their families; the measures the company takes to provide internal education and maintain accountability metrics to promote LGBT inclusion competency; and whether a company has made a public commitment to the LGBT community.
Along with the social aspect, the underlying index also screens for companies that have positive operating income over the prior twelve months.
“So we look at financial factors and social factors,” Cea added. “From a financial standpoint, we’re making sure that companies have minimum liquidity and profitability metrics.”
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