Nearly half of U.S. investors in a recent Morgan Stanley survey want opportunities to invest in LGBTQ+ equity and inclusion, across a broad range of products and strategies.
This demand increases substantially among LGBTQ+ investors (86%), heterosexual investors with an LGBTQ+ household member (76%) and younger investors (67% of Gen Z and 56% of Millennials). However, there are very few investment options today focused purely on LGBTQ+ equity.
For asset managers and wealth managers, exploring these options may have the benefit of helping to improve equity and inclusion for the LGBTQ+ community while meeting investor demand and capturing investible assets from younger investors.
The Market for Investments Advancing LGBTQ+ Equity & Inclusion
Although the LGBTQ+ community in the U.S. is growing, with 26 million people representing 8% of adults overall and 21% of Gen Z adults, individuals still face social and economic disparities. Half of LGBTQ+ workers report that they have experienced workplace discrimination5 and LGBTQ+ founders have raised just 0.5% of venture capital in the U.S.
Investor capital could act as a lever to address such inequities. “Investing with LGBTQ+ objectives describes the effort to direct investment capital toward the advancement of populations historically disadvantaged based on their sexual orientation or gender identity,” says Susan Reid, Morgan Stanley’s Global Head of Talent and Director of the Institute for Inclusion. “The goal is to advance equitable and inclusive opportunities for the LGBTQ+ community, while also delivering market-rate financial returns.”
The business case for LGBTQ+ investment products includes both investors who identify as part of that community as well as younger investors: Investors born after 1980, regardless of their identity, could play a significant role in demand for these products.
A majority of Millennial and Gen Z investors expressed interest in finding investment options that advance LGBTQ+ equity and inclusion. As older generations transfer wealth to their heirs in the coming decades, $73 trillion is predicted to move to investors more interested in investible products and strategies advancing LGBTQ+ equity.
In Morgan Stanley’s analysis, holding all else equal, this generational wealth transfer could drive demand growth by boosting the assets of those interested in LGBTQ+ equity investing by more than 40%.
Meeting the Opportunity
Despite this investor interest, investment options today are limited. Among interested investors, 42% highlighted a lack of LGBTQ+ equity investment opportunities. Nearly a third did not know how to invest in this theme (32%) and lacked research or data on the theme (31%).
This demand creates opportunities for asset managers to differentiate themselves among investors within and beyond the LGBTQ+ community. “Our research suggests that nearly $20 trillion9 is currently held by investors interested in products or strategies that advance LGBTQ+ equity but don’t have viable options to do so,” says Jessica Alsford, Morgan Stanley’s Chief Sustainability Officer and CEO of the Institute for Sustainable Investing. “Any new product or strategy aligned with this theme—from screening approaches to funds that target positive impact—could be well-received by interested investors, giving asset managers the opportunity to potentially differentiate themselves in the market.”
Investors may also consider philanthropic giving to organizations with the primary mission of advancing LGBTQ+ equity, or major programming dedicated to the LGBTQ+ community.
The survey found that demand for philanthropic giving targeting LGBTQ+ equity and inclusion was particularly high among people who identified as heterosexual but have an LGBTQ+ household member (89%), even higher than responses from LGBTQ+ investors (87%).
In addition, to specific investments that advance LGBTQ+ equity, 80% of LGBTQ+ investors and 40% of non-LGBTQ+ investors see this issue as an important factor when selecting a financial advisor or platform. In fact, 80% of LGBTQ+ and 31% of non-LGBTQ+ investors would switch financial advisors or investment platforms based on LGBTQ+ equity and inclusion opportunities.
More disclosure from corporates and reputable data providers will be needed to help scale LGBTQ+ equity investing and close the supply-demand gap for products and strategies targeting this theme. As younger generations more interested in LGBTQ+ equity investing inherit and build more wealth, and as the U.S. LGBTQ+ population increases, asset managers and financial advisors would be wise to examine the opportunities and position themselves for potential market leadership.
To view the full report, click on the following link.
