Ellevest Private Wealth Management was built to serve people who feel neglected by the current financial services industry — and supporting the fight for LGBTQIA+ justice is part of that. One way we do that is through sustainable and impact investing — not only in companies that materially improve the lives of queer and trans people, but also in companies founded by members of these diverse groups.
How Ellevest Private Wealth invests for LGBTQIA+ justice
All investors, regardless of sexuality or gender identity, can build more socially-conscious investment portfolios. We can all invest in businesses that both adopt strong anti-discrimination practices and avoid exploitative business practices that have historically harmed vulnerable communities. At Ellevest, we help our clients do this through a multi-pronged approach to investing. Here’s how that approach works when it comes to LGBTQIA+ justice:
1. We invest in companies with robust corporate diversity and inclusion practices
In the United States alone, one in five people who identify as LGBTQIA+ still report experiencing discrimination based on their identity during the hiring process. (Frustratingly, fewer than half of US states have laws that prevent discrimination based on either sexuality or gender identity.) LGBTQIA+ workers are far more likely to experience discrimination from microaggressions to sexual harassment; trans workers, in particular, are much more likely to remain in entry-level positions and to believe their gender and/or sexuality will be a barrier to career advancement.
Ellevest’s Intentional Impact portfolios invest in companies that take action against these inequities by implementing strong diversity and inclusion practices, as well as robust non-discrimination policies. These companies clearly define sexual orientation and gender identity in their nondiscrimination policies, extend benefits to domestic partners, offer trans-inclusive benefits like gender-affirming health care, display organizational LGBTQIA+ competency, and extend their nondiscrimination standards to contractors and suppliers as well.
2. We invest in companies that prioritize data security and product quality and safety
As of 2019, 70 United Nations member states criminalize consensual same-sex relationships. Breaches of sensitive data are a major concern for international security and civil rights in general, but they’re even more dangerous for LGBTQIA+ people in these regions, where those breaches can expose them to persecution or worse.
So doing right by the LGBTQIA+ community demands that, in deciding where to invest, we evaluate companies based on their policies and practices around data privacy, safety, and management — particularly in industries like tech, where companies have access to large volumes of sensitive consumer or business data. Data security is one of our main criteria when we filter our Intentional Impact portfolios for Product Quality and Safety.
3. We invest in companies with programs that improve access to essential products and services
Another area where LGBTQIA+ people are disproportionately more vulnerable is that of wealth inequality. Queer and trans people collectively experience much higher poverty rates than those who do not: As of October 2019, one in five people who identify as LGBTQIA+ live in poverty; among Black queer people, that rate rises to 30.8%. The pandemic alone cost LGBTQIA+ workers more jobs by a significant margin, and queer people of color lost significantly more jobs than white LGBTQIA+ workers. Also, poverty increases vulnerability to forced labor and other forms of exploitation, which means that LGBTQIA+ workers are dramatically more likely to have trouble obtaining adequate resources and accessing essential services.
Investors must go beyond prioritizing companies that cultivate a queer-friendly workplace for employees and also seek out those whose products, services, and initiatives are designed to eliminate barriers to access — financial and otherwise — for the LGBTQIA+ community. Ellevest Intentional Impact portfolios exclude companies on this basis, filtering with criteria ranging from weak pay structures — those with excessive pay gaps between their highest paid executives and lowest paid workers — to poor labor relations and working conditions.
4. We connect diverse business owners with private capital
In 2020 alone, more than $156.2 billion in capital was invested in US companies — but LGBTQIA+ founders still receive less than 1% of those deals. (No wonder something like 37% of LGBTQIA+ founders still choose not to “out” themselves to investors.) Getting more capital into the hands of people from marginalized groups overall, including but not limited to LGBTQIA+ entrepreneurs, is one of the main priorities of our fund managers, who are a diverse group themselves.
Investing intentionally? Having the right financial team matters.
In order to make your investment strategy match your values, you need a team of planners and advisors in your corner who not only are well-versed in inequity, but also intentionally specialize in avoiding its sources in the financial sector. The first step is understanding the impact your assets are having right now; speak to an Ellevest financial advisor on our Private Wealth Management team if you’re interested in running a health check on your investments so you can better understand how they live up to your values.
At Ellevest Private Wealth Management, diversifying our clients’ investments to achieve market returns is still our top priority, but we believe investors shouldn’t have to sacrifice one to get the other. Ellevest financial advisors can run those portfolio diagnostics using our extensive filtering criteria to show you how and where your current investments might be invested more meaningfully — all while still seeking to minimize tracking error to the market benchmark. We can also assist Intentional Impact clients in proxy voting, which gives investors even more of a voice with the companies they do invest with.
When advisors and investment companies articulate their commitment to social and environmental justice and empower investors with that commitment, building wealth can be as simple as building a better world — for the LGBTQIA+ community and beyond.
© 2023 Ellevest, Inc. All Rights Reserved.
The Ellevest Intentional Impact Portfolio is a separately managed equity account that is sub-advised by Ethic, Inc., a SEC-registered investment advisor. As sub-adviser, Ethic constructs and manages portfolios of individual stock positions benchmarked to an underlying index and customized to specific values criteria. The sub-adviser seeks to deliver equity market returns that track closely with a designated equity benchmark (domestic and / or international) while outperforming on impact across key sustainability criteria as defined by Ellevest and / or the client.
The Ellevest Intentional Impact Portfolio is expected to comprise around 300 US-listed equities (including ADRs as applicable) chosen through an outsourced multi-factor optimization software and sustainability data science developed by Ethic to minimize tracking error.
The sustainability criteria is based on risks in the following categories: Ethics and Fraud, Firearms, Excessive Remuneration, Exploitative Products, Greenhouse Gas Emissions, Human Rights and Community (including private prisons), Labor Relations, Product Quality and Safety, War, Waste, Working Conditions and Workplace Diversity (including gender metrics on low employee representation, low management representation , and low board representation.
The Ellevest Intentional Impact portfolios uses the divestment recommendations created by the American Friends Service Committee to identify and screen out companies for practices around the private prison ecosystem. Those recommendations are based on an assessment of three criteria: the salience of the human rights violation, the company's responsibility for the violation, and the company's responsiveness to stakeholders’ concerns about the violation.
A firm reporting that more than 5% of their revenues are from firearm sales will be screened out. Note that not all companies report their revenues from gun sales, so we can’t guarantee that you will be fully divested from firearms.
The primary benefit of the Ellevest Intentional Impact Portfolio is that it provides broad market exposure with a goal of keeping average tracking error low over the long term, less than 1.50%, while divesting from companies that do not meet the strategy’s sustainability parameters. The tracking error may be meaningfully higher if the equity allocation is transitioned over time due to tax or other considerations or if the customized sustainability criteria specified by the client overly restricts the investable universe of securities.
Some of the key risks for investing in the Ellevest Intentional Impact Portfolio include:
Market Risk
As with all publicly traded securities, the SMA is exposed to market risk, the risk of losses arising from fluctuations in market prices caused by factors independent of a security’s particular underlying circumstances.
Active Risk
Although the SMA is constructed to minimize tracking error relative to its benchmark, there is no assurance that the strategy will generate market returns within the estimated tracking error. Because the SMA is designed to capture investment returns associated with gender and racial diversity, and high environmental and governance standards, the SMA may exclude, overweight, or underweight individual companies and/or sectors of the market. As a result, the SMA will not fully participate in the market returns of a general investment strategy. The SMA may over or under perform a general market strategy.
Sub-Adviser Risk
The success of an account’s investment through sub-advisers is subject to a variety of risks, including those related to the quality of the management of the sub-adviser and the ability of such management to develop and maintain a successful business enterprise, and the ability of the sub-adviser to successfully execute, operate, and manage the intended strategy at or below the target tracking error.
Business Risk
The fund’s strategy relies on key personnel, their expertise, relationships and networks. A loss of one or more key personnel may adversely impact the strategy.
The Ellevest Intentional Impact Portfolios give clients access to broad equity market exposure. The target tracking error for the Portfolios is currently under 1.50%. Reporting on the Ellevest Intentional Impact Portfolios will be provided to clients no less than annually.
The minimum investment in Ellevest Intentional Impact Portfolio is $250,000. In addition to Ellevest’s advisory fee, the client will pay 0.25% of assets managed to the Sub-adviser. All opinions and views expressed by Ellevest are current as of the date of this writing, for informational purposes only, and do not constitute or imply an endorsement of any third party’s products or services.
The information provided should not be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice.
The information provided does not take into account the specific objectives, financial situation or particular needs of any specific person.
Diversification does not ensure a profit or protect against a loss in a declining market. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income.
Investing entails risk, including the possible loss of principal, and there is no assurance that the investment will provide positive performance over any period of time.
Cameron Rogers
Cameron has worked in the financial industry for over 15 years, including a decade of advising high net worth individuals and institutions at J.P. Morgan. She currently oversees individual, family, and non-profit investment relationships and specializes in helping clients with public and private market investing, generational wealth transitions, and sustainable investing. She is passionate about financial literacy and helping women develop greater agency with their money. Book a call with Cameron.