Microsoft, Apple, and Amazon, the three largest constituents in the Morningstar Developed Markets LGBTQ+ Leaders Index as of June 28, 2024, help demonstrate the growing importance of social factors in differentiating companies.
The recently introduced index, which is designed to deliver exposure to 100 large- and mid-cap companies with strong LGBTQ+ inclusive policies and practices from a diverse range of regions and sectors, rose 11.5% in the first half of 2024, slightly less than the 12.1% rise for its parent index, the Morningstar Developed Markets Target Market Exposure Index, a much broader and less concentrated index with 1,444 holdings.
Microsoft, Apple, and Amazon, which currently represent nearly 15% of the index, have risen 35.2%, 12.3%, and 51.3%, respectively, over the past year through July 2. In addition to meeting baseline ESG screens for LGBTQ+ Leaders Index inclusion as determined by Morningstar Sustainalytics, all three companies rank a “6” or “7”—the two highest ratings on LGBTQ+ inclusive policies and practices as determined by ExecuPride.
Rob Edwards – Global Head of ESG Product Management, Morningstar Indexes, said:
“Our new LGBTQ+ Leaders Index is a great new way for investors who wish to identify companies with more inclusive LGBTQ+ policies and practices. The index delivers diversified exposure to companies that have publicly demonstrated support for LGBTQ+ representation, such as having strong advocates at the leadership level. Similar to our gender diversity index, it provides a rules-based approach for investors to compare leading companies based on more specific screens and weight these companies within a transparently and objectively structured index.”
Shavana Haythornthwaite, Head of Human Rights, Morningstar Sustainalytics, said:
“Investors are placing increasing importance on social factors when evaluating potential investment approaches, for both ethical reasons, as well as for investment opportunity. However, data and measurements in the social, or “S” area of ESG have lagged environmental or climate, and governance-related analysis. With more data and metrics on LGBTQ+ issues, investors have more insight, which can help them determine whether to consider these factors as material one for their portfolio.”
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