Workplace Equality Index Fund EQLT: Insights From the Portfolio Manager

June is LGBTQ pride month.

This is a great time to consider the role that corporations have had in increasing acceptance of sexual minorities over the last few decades in the U.S. and abroad.

Companies have done this primarily by adding workplace policies that protect LGBTQ people from harassment and firing for sexual orientation, or by including same-sex couples in company benefits programs, or by fostering diversity groups that allow LGBTQ to meet.  

These things have not always been a given. In fact, in 27 states it’s still legal to fire someone simply for being LGBTQ.

Meet John N. Roberts

Roberts recently took some time out of his busy day to talk with Stash about EQLT. The following is an edited transcript of the conversation.

John N. Roberts is the portfolio manager for the Workplace Equality Index. The Workplace Equality Portfolio ETF  (EQLT) tracks the index.

Roberts has been researching companies with favorable policies toward LGBTQ people for more than 20 years. In 2014, he formally launched the Workplace Equality Index, which tracks publicly traded companies that support equality in the workplace for their LGBTQ workers.

The companies run the gamut from technology enterprises including eBay, Tesla and PayPal. More established names include Walt Disney, Marriott International, and Johnson & Johnson, as well as Starbucks, Home Depot and JPMorgan Chase. The index has 251 such companies, and to date the Workplace Equality Portfolio ETF has $15 million under management.

Roberts recently took some time out of his busy day to talk with Stash about the index and EQLT. The following is an edited transcript of the conversation.

Q: How did you get started with the Workplace Equality  Index?

A: In the late 1990s I had an interesting opportunity. There was a visionary entrepreneur named Kevin Mossier. He started a company called RSVP Vacations. Essentially he started the gay travel industry and was wildly successful. His assets went to a private foundation in 1997 when he passed away. That is where I got involved.

We were hired to manage this foundation, and the trustees said one thing that Kevin wanted was for the assets to be invested in companies that treated LGBT workers equally. We started out by calling companies and asking them. The first year we could only find 24 companies with domestic partner benefits.

Q: Did you have a sense that other people wanted to invest in companies with LGBTQ equality policies?

A: We had lots of clients who sat on foundation boards, or who were wealthy individuals. They  kept asking how their brother or aunt or niece — people who didn’t have millions of dollars to build out a separate portfolio —  could invest this way.

We realized there was a severe lack of LGBTQ focus in the investment community, and no one was screening for workplace policies for LGBTQ employees, so we decided to launch it ourselves.

John N. Roberts

Q: You now have nearly 251 companies in the Workplace Equality Index. What changed?

A: The decision for many companies to embrace workplace equality was very much a business decision related to equality for women in the workplace, and racial equality. It fit into those metrics.

When you get into the early 2000s, companies like General Motors and Procter & Gamble and beer companies and other direct facing consumer companies realized the you have this dual income, no-kid part of the population to sell to. And early on they realized, being forward thinking, they couldn’t sell to this market if they were not walking the walk, and paying attention to them from a workplace perspective.

Q: How do you screen the companies in the index?

A: We look at all publicly available data, but a lot of what we do focuses on talking to employees.

We listen to what management says, but we would rather hear it from employees. We ask them questions about inclusion. Are these companies supporting their local gay and lesbian chamber of commerce, and giving adequate funding to their pride group? What is the employee experience?

We’ve had companies that have surreptitiously cut funding for the (LGBTQ) employee resource group. If you don’t talk to employees, you don’t find those things out.

Q: Can you tell Stash investors what place the EQLT fund could have in their portfolios?

A: We created this portfolio as a way for nonprofit foundations to have broad market access. We look at it as an S&P 500 or Russell 1000 company replacement, for someone who doesn’t want to invest in companies that don’t support equality.

I don’t want to get too far into the weeds, but it essentially has the same volatility of the S&P 500. We have about 80% of the portfolio in large cap, and then another 20% is small and mid cap. It is a very broad and very diversified portfolio. And each company has the exact same weight in the portfolio, which gives a broader representation across the market.

Check out: Large Cap, Small Cap? What Does It Mean? 

Q: What are the important trends for EQLT?

A: We see more companies over time adopting LGBT-inclusive workplace policies. We know that companies that treat all of their employees equally, regardless of sexual orientation or gender identity, provide better shareholder returns over long time periods.

There is also a war for talent, and those companies that open their doors equally will win that war. In the end, equality is good for business and the business owners.

Q: What else do you have to tell Stash investors about EQLT?

A: Social change occurs at the business level, and by supporting companies that embrace workplace equality, investors have the ability to send a message to the marketplace, that it makes good business sense to treat everyone with equality, dignity, and respect. Companies that treat their employees better tend to have better shareholder returns.

It also surprises me that there are only 251 companies that qualify of the thousands of publicly traded companies. As much progress as has been made for LGBTQ people, there is still a long way to go.

Recommended Reading: Equality Works: Explore this ETF 






Author:
Jeremy Quittner is the financial writer for Stash.



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