Investing for Inclusion: Exploring an LGBTI Lens

A growing number of private sector businesses, regulators, and impact investors are playing an increasingly important role in fostering Diversity, Equity, and Inclusion, especially in the COVID-19 recovery era, as they embrace social and environmental considerations and turn towards ESG and SDGs- focused investing across all asset classes. Sexual orientation and gender equality, for example, are also mentioned in IFC’s Performance Standards as well as the Social Bond Principles.

This guide makes the case for LGBTI-inclusive investment and provides a 3-step guidance framework on how impact investors can apply an LGBTI lens and evaluate investment deals at various stages of the investment cycle to ensure inclusion of LGBTI people as leaders, employees, consumers, entrepreneurs, and community members.  It combines lessons from various organizations and draws on emerging best practices. The guide aims to generate ideas and encourage dialogue, and highlight this topic for further discussion, development, and action.

The market opportunity is significant: Lesbian, gay, bisexual, transgender, and intersex (LGBTI) communities represent between 560 and 800 million people worldwide and USD 4-5 trillion in purchasing power, with USD 1.1 trillion of that in emerging consumer market in Asia and Latin America.

The LGBTI lens investing approach builds on the gender lens investing approach and expands it by going beyond the gender binary (male versus female) and integrating an analysis of sexual orientation and gender identity (SOGI). There are strong linkages between gender and LGBTI lens investing approaches because LGBTI people experience inequities and exclusion resulting from similar socio-economic barriers and norms and beliefs about gender roles that prevent women from accessing opportunities.

LGBTI lens investing is a strategy that seeks to intentionally and measurably use capital to address inequalities faced by LGBTI individuals, and to better inform investment decisions. It is an approach that helps an investor highlight opportunity and eliminate risk to achieve better financial and social outcomes for all. Investors can utilize one, all or a combination of the following strategies when investing in companies or financial intermediaries: 

• Step 1: Select an LGBTI Lens
  • Pick stakeholder groups to focus on
  • Consider different business models and markets
• Step 2: Apply the lens to pre-investment activities
  • Action 1: Consider geographical focus, legal frameworks, and social norms
  • Action 2: Build a diverse pipeline by broadening networks
  • Action 3: Screen prospects with an LGBTI lens by conducting a gap analysis
  • Action 4: Identify actions investees can take: 
    • Leaders
    • Employees
    • Consumers
    • Entrepreneurs
    • Financial intermediaries (indirect investments)
  • Action 5: Consider relevant issues for structuring
• Step 3: Measure results post-investment