Picking the winners: How Wall Street embraced the first successful LGBT index
Billy Bean knows about what it takes to win in a way that matters. In 1999 at the age of 35, Bean became the first Major League Baseball player to come out to the public at large — but only after major ups and downs, and the final realization that nothing he did had value unless he was true to himself. His highly readable and inspiring memoir Going the Other Way details this journey.
Thanks to athletes like Bean, and of course Navratilova and Billie Jean King who were both forced to come out in 1981, sport is an arena where a handful of LGBTQ athletes have helped move the needle of public acceptance in favor of our community. But the corporate and financial world has only recently been accepting enough so that in 2014, Apple’s Tim Cook could become the first chief executive of a Fortune 500 company to publicly come out as gay. Wall Street, however, has never had an inclusive reputation.
It was therefore enticing to Bean to join a new financial venture from LGBTQ Loyalty Holdings, Inc., a diversity-and inclusion-driven financial methodology and data company that launched the LGBTQ+ ESG100 ETF (NASDAQ: LGBT) on May 18. According to the prospectus, “The Underlying Index represents the top 100 U.S. companies that nurture and promote equality in the workplace for employees of all gender and sexual orientation, have a strong track record of loyalty and brand awareness among the U.S.-based LGBTQ community, and have a history of consistently strong financial performance. The Underlying Index attempts to capture market outperformance of these companies as compared to their competition.”
The index is the brainchild of former professional tennis player and entrepreneur Bobby Blair, who assembled a board of heavy hitters to help get the index onto the New York Stock Exchange.
“The gamble was, Do these companies really do better because they're serving the community better?” reveals Blair. “And is the spending power really loyal to a point where it makes a difference to their bottom line? Is their H.R. department more successful? Is the retention in the workplace better? Are lawsuits down? Is there a bigger net for a massive talent pool that doesn't discriminate in hiring? … And we were really fortunate after 15 months of the index trading that we had a 46 percent return. And we had a six percent return that outperformed the S&P 500.”
With that track record the LGBT ETF went live. If you’re wondering how the top 100 companies are chosen, Blair says there are four criteria: The company must score at least at ninety with the HRC; it must have a high score with the Institutional Shareholder Services Inc., the world's leading provider of corporate governance and responsible investment solutions; the company must pass a vigorous financial stress test; and most importantly, the company must poll well among 150,000 LGBTQ constituents in all 50 states. These four factors went into whittling down an initial 500 potential companies to the final 100. And those 100 are subject to ongoing scrutiny. If a company in the index does something anti-LGBTQ there's a 45 day window to fix it,” says Blair, “and if they don't, we have the ability to pull them out and put a company that's next in line.” And those names will change every year in the third or fourth quarter, the index gets reconstituted based on new polling according to Blair.
The companies in the ETF are themselves diverse, says board member Orlando Reece. “It really is a great cross-section of many kinds companies from the big financial corporations to the Cokes, the Home Depots, and the United Health Cares of the world who have come in… these are the products I like to work with, like Apple, the places I like to go, like Starbucks — companies that we all use every day that help our community, for example providing health care for transgender employees.”
Bean bonded with his fellow board member Martina Navratilova many years ago at a time when “it didn't feel so friendly out there to come out.” Bean shares that the ETF embodies his and Blair and Navratilova’s long-held belief “there might be an upside to focusing on companies who are doing right by doing good.”
“So the idea of bringing us together,” says Bean “started to manifest itself into qualifiers: How do we create a criteria that is going to highlight companies that pursue LGBTQ community for their product, for employers who offer same-sex benefits in the workplace? And then it just kept growing… Long story short is our methodology is going to show performance. We came up with a product that that made sense, we put together a board of people with very diverse living experiences who were able to talk about it in a way that we could promote opportunity for investors to peek into the window of a group of companies that all believe in the same philosophy of advancing equality and caring about the world.”
People like myself and Martina have lived through a narrative of the LGBTQ+ community being marked by some of our darkest times, and in the midst of a lot of progress, we still live in a very divisive time.Billy Bean
“The ETF is an opportunity for investors to vote in support of equality with their pocketbooks. Maybe business will forge the future as opposed to divisive legislation that tries to divide us and take away the civil rights of our community. And so the philosophy, I think, has really high aspirations for elevating goodness," continues Bean.
For Bean, the most exciting part of the venture is that the index with the LGBT ticker is now out there as a publicly traded financial asset — and one that has outperformed many other ETFs. For the first time in his life he has seen himself represented in an arena that has traditionally been as intolerant as sports. That’s another vindication for a man who struggled with his sexuality, married a woman, and who could not even attend his first male lover’s funeral — all for fear of being outed.
“Martina is an athlete. I've been in sports my whole life,” says Bean. “And we now have LGBT on the New York Stock Exchange! We’ve never been represented there or on the Nasdaq. It’s exciting. I mean, we are loyal, but we are tough and we're not just going to give our money or our time or our energy or our services away; we want to see some performance. And so it's going to be really, really fun to watch that continue to elevate. It's a big moment. I really feel like it is.”
“Billy was an inspiration to me to come out,” reveals Blair. “In 2013, I finally officially came out and Billy Bean was hugely supportive and he was very committed to guiding me through this process. So when I had the idea of doing this, I called him first and he said, ‘Absolutely, 100 percent, if we can connect Wall Street to our community and we can encourage companies to do better and reward them, sign me up’.”
Like Bean, Blair feels similar pride about being out there now. He recalls that in his youth as a tennis player he was more concerned with being outed than he was with his training. Nevertheless, he met Navratilova 35 years ago and became her hitting partner when she was number one in the world. “I used to fly over from Fayetteville, Arkansas to Dallas and practice with her for long weekends,” Blair recalls. “And it was a really cool thing. … So when I saw Martina at the U.S. Open, I said, ‘Martina, would you like to join us? And she just started getting teary because she had always dreamed of being able to be part of bringing big money and Wall Street to the community.”
Navratilova even released her statement to the press on May 18, the day LGBTQ Loyalty Holdings, Inc. announced the launch of the ETF. “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 through this announcement. Seeing the trading symbol ‘LGBT’ listed on Nasdaq is truly historic.”
Reece says it’s estimated there is around 3.7 trillion dollars in spending across the LGBTQ community and that our community’s brand loyalty can be rewarded not by buying into pricey and volatile individual stocks, but by investing much smaller amounts in an ETF, across 100 companies that represent their values and what they're all about.
But perhaps the macro value of this index is best articulated by former U.S. Representative Barney Frank, also a board member, who says economic inclusivity and progress are intertwined.
It's long been the case that the companies in America that are willing to maximize their ability to employ talent have done well. And that's essentially what we are talking about. We're talking about a situation where there has been a significant percentage of the population excluded. And now we've found that companies that are simply inclusive, in fact, do better.Barney Frank
Frank sees buying into the fund as a way for allies to put their money where their mouth is: “Coming out to your parents has been one of the big issues for gay people. Parents and grandparents might appropriately buy shares in this ETF and give them to their LGBT children and grandchildren. It is a great way to promote intergenerational harmony and show support for our issues while financially helping out.”
And as for banishing the specter of “rainbow washing” while trying to hold onto what’s unique about our community, Frank feels the ETF is a synthesis of assimilation, acceptance and authenticity — the balance that athletes like Bean and Navratilova fought so hard for.
“There are some people in the LGBT community who have talked about separating themselves [from the mainstream]. I think that's an error,” Frank says. “We've been on the defensive for much of our organized life as a community, protecting ourselves against discrimination. This index is an important, positive step. This is a step that says, ‘We want to be treated like everybody else, and that includes being able to participate in the economy, to reward companies that recognize that we are entitled to equality.’ So from every standpoint, it's a real plus.”
Learn more about the LGBTQ+ ESG ETF at lgbtqloyalty.com.