LGBTQ Loyalty Holdings, a diversity-driven financial methodology and data company, has launched its debut ETF, a passive US equity fund investing in companies with robust ESG characteristics and a demonstrable commitment to LGBTQ+ inclusion.
The fund provides exposure to US large-cap firms with robust ESG characteristics and a demonstrated commitment to LGBTQ+ inclusion.
The LGBTQ + ESG100 ETF (LGBT US) has listed on Nasdaq in collaboration with Procure ETF Trust.
The fund is linked to the proprietary LGBTQ100 ESG Index which was developed by Loyalty Preference Index, a wholly-owned subsidiary of LGBTQ Loyalty Holdings.
The index is calculated and administered by big data analytics specialist Fuzzy Logix.
Constituents for the index are selected from the S&P 500. Companies conducting business operations related to weapons, tobacco, adult entertainment, and gambling (66% revenue threshold) will not be eligible for inclusion.
The methodology first examines the results of a survey conducted by a Washington-based human rights organization that polls the S&P 500 companies based on three pillars: non-discrimination policies, equitable benefits for LGBTQ workers, and supporting an inclusive culture and corporate social responsibility. A new company joining the index must have a perfect score of ‘100’ while existing index constituents must maintain a score above ‘90’.
The methodology also harnesses data from Institutional Shareholder Services (ISS) to assign scores and rank the S&P 500 constituents according to a broad assessment of ESG-related risks. Companies that pass the above survey screen and rank within the top 75% of the S&P 500 by ESG score will form the eligible index universe.
Companies that fulfill the survey requirement but do not satisfy ISS’s ESG screen may still make it into the eligible index universe if they score highly on LGBTQ+ brand loyalty and support. To ascertain this, Fuzzy Logix examines the Harris Poll survey results of around 3,000 LGBTQ+ community members regarding their view of a company’s brand, their loyalty to that brand, and their view on how the firm supports the LGBTQ+ community. Companies are ranked based on the survey results and firms placed above the median score will also ascend into the eligible index universe.
From this eligible index universe, the methodology selects the 100 stocks with the highest sales growth over the previous year. Constituents are weighted using a composite fundamentals score based on market capitalization, share price volatility, and price-to-earnings ratio. The weight of any single stock or sector is capped at 5% and 25% respectively. The index is reconstituted annually and rebalanced on a quarterly basis.
Technology stocks dominate the index with a maximum weight of 25%, while the health care (16.0%), financials (12.4%), consumer staples (12.3%), and consumer discretionary sectors (10.6%) also play significant roles. Notable positions include Tesla (5.9%), Amazon (4.4%), Apple (3.8%), Microsoft (3.0%), and Marriott International (1.9%).
The ETF comes with an expense ratio of 0.75%.
There was previously an ETF specifically dedicated to LGBTQ+ equality and inclusion – the Workplace Equality Portfolio (EQLT US), which was sponsored by fund distributor ALPS, launched in February 2014 but was liquidated in April 2019 due to a lack of investor interest.
More recently, San Francisco-based Adasina Social Capital introduced the Adasina Social Justice All Cap Global ETF (JSTC US), providing exposure to a global portfolio of companies working to advance equitable systems such as racial justice, gender justice (including LGBTQ+ equality), economic justice, and climate justice. The fund launched in December 2020 and currently houses $50m in assets.
The LGBTQ + ESG100 ETF is the first, however, to combine LGBTQ+ inclusion with ESG and financial performance criteria, making it a unique proposition. Its launch also comes amid surging demand for socially responsible investing with assets dedicated to ESG-focused ETFs globally nearly tripling in 2020 to reach $174.5bn at the end of the year, according to the TrackInsight Global ETF Survey 2021.
Advancing equality
Martina Navratilova, former Hall of Fame professional tennis player and member of the LGBTQ Loyalty board of directors, commented: “I am thrilled that the launch of the LGBTQ + ESG100 ETF has arrived. Today is an important day for advancing equality as we showcase companies that align and support the LGBTQ community. Seeing the trading symbol ‘LGBT’ listed on Nasdaq is truly historic.”
Barney Frank, Former US Congressman, Chairman of the House Financial Services Committee, and member of the LGBTQ Loyalty board of directors, added: “I’m very proud to be part of this doubly beneficial effort: it provides supporters of LGBTQ equality with access to investments that reflect their values, while simultaneously rewarding businesses that demonstrate that ethical behaviour and profitability are fully compatible.”
Bobby Blair, Executive Chairman of the LGBTQ Loyalty board of directors, said: “The launch of the much-anticipated LGBTQ + ESG100 ETF is at a consequential time for the LGBTQ community and our supportive allies and a monumental time for advancing equality. We are proud to provide investors with the means to invest in top corporations that align with their interests and embrace equality, diversity, and ESG principles in the workplace.”
