The concept of investing ethically to positively influence government and corporate policy is not a new one. Traditionally, efforts have been focused on development-based issues, but wealth management company Equality Capital supports an overlooked and often under-threat group – the LGBT (lesbian, gay, bisexual and transgender) community.
Investment in ethical causes is gaining traction. Last year, the World Bank committed to spend 28 per cent of its investments on climate change projects. In addition, the behaviour of organisations matters to the public, especially to up and coming young investors.
The recent Deloitte Millennial Survey 2017 found that people born between 1980-2000 believe businesses are falling short of their potential to address societal change.
For all the progress the impact investment movement has made, the issue of LGBT rights has not been addressed until now.
Equality Capital was launched in 2017 to service a like-minded community of investors who care about LGBT positive rights and equality. Part of CPN Investment Management, which manages more than £200m of total client assets, Equality Capital believes impact investing can change corporate and government-sponsored activity against the LGBT community.
We are exceptionally fortunate here in the UK that our democracy has chosen equality and that the law protects our rights.
However, there are many places around the world where this is not the case and by making intelligent, well-informed investment decisions we can ensure that we are not inadvertently supporting areas that contribute to the suffering of LGBT people.
While impact investing is a growing segment of the market it has not really touched on LGBT rights, as it often focuses on addressing poverty in developing nations. Conversely, Equality Capital invests mainly in developed markets, as this is where LGBT rights are typically more advanced.
Equality Capital assesses investment markets according to six criteria: marriage equality, partnership rights, discrimination in employment law, adoption rights, military service rights and legal punishments for being LGBT.
The firm then creates and manages risk-adjusted and globally diversified investment portfolios for its clients that avoid certain countries that do not protect the LGBT community; countries like Russia and China.
Equality Capital uses a two-step process. Initially the research team’s screening process rates countries and sectors against six criteria to identify areas where LGBT rights are recognised and where LGBT rights are not protected. There is a range of countries that pass this test, but these are predominantly in Latin America, Europe and North America.
The research team then matches the best-performing funds to correspond to these
geographical areas and drills down into the underlying holdings of the fund to ensure they are investing in LGBT-friendly areas.
Using this process, Equality Capital runs three different risk-adjusted portfolios that are cautious, balanced or adventurous. The portfolios have targeted returns of between 5 per cent and 15 per cent depending on their risk weighting.
It is possible to build robust and fully diversified portfolios that adhere to the strict screening process.
Charlie Nicholls is a managing partner at Equality Capital