Credit Suisse Says LGBTQ-Inclusive Stock Basket Has Outperformed

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Shares in companies supporting diversity including gender identity and sexual orientation have historically performed better than the broader market, according to Credit Suisse Group AG analysts.

Credit Suisse’s market-cap weighted basket of about 350 LGBTQ-inclusive companies, which includes firms such asApple Inc.,Tesla Inc. and JPMorgan Chase & Co., has outperformed MSCI Inc.’s flagship ACWI global equity index excluding those 350 constituents by 378 basis points a year since 2010, analysts including Eugene Klerk wrote in a report.

These companies more easily attract and retain talent, with 72% of LGBTQ allies saying they’re more likely to accept a job where the employer supports LGBTQ equality, Credit Suisse said. Revenue growth and cash flow returns at the companies in the broker’s LGBT-350 basket also tended to be stronger than at the remaining firms in the MSCI ACWI Index, according to the analysts.

“The need for companies to take a pro-active LGBT+ approach is obvious in our view,” the analysts wrote. “With LGBT+ consumers making up between 5%-10% of the population we estimate that consumer spending by LGBT+ could represent as much as $5.6 trillion.”

Credit Suisse said it selected basket members based on either the presence of openly LGBTQ managers in senior positions or recognition as a top LGBTQ-inclusive employer in surveys such as the Human Rights Campaign’s Corporate Equality Index.

Almost 90% of companies in the LGBT-350 are based in North America, with financials and information technology among the top sectors represented. Another index tracking inclusivity, the U.S.-focused LGBTQ100 ESG Index, has also outperformed this year, with an 18% gain compared with 12% for the benchmark S&P 500 Index.

Even so, Credit Suisse said its analysis doesn’t aim to prove that a company’s focus on LGBTQ equality is the reason for potential outperformance, but merely highlights that these two factors coexist for the average stock in the LGBT-350.

— With assistance by James Cone

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