In what seem to be the first-ever moves of their kind, DiNapoli’s New York State Common Retirement Fund, which manages $260 billion in assets, is pushing for more details about companies’ human capital management strategy work related to LGBTQ+ employees.

In proxy statements published this month, $45 billion Lennar Corp. and $13.5 billion International Paper disclosed matching shareholder proposals from the retirement fund. The proposals are backed by a supporting statement explaining that demographic shifts show that 20.8% of Gen Z identifies as LGBTQ+, which is twice that of the 10.5% of millennials who identify that way. Furthermore, a third of people who identify as LGBTQ+ report experiencing harassment or discrimination in recent years and, nearly half, 45.5%, report facing discrimination at some point in their lives.

Lennar and International Paper have recommended that investors vote against both proposals.

Expanding focus

The proposal is a new front in some investors’ quest to get more expansive data on diversity from companies, and similar efforts have been fruitful in obtaining more granularity on policies related to gender, race, and ethnicity. Now investors are expanding their focus to include LGBTQ+ employees. Investors have used the more detailed reporting in recent years to hold boards and C-suite teams to account for public diversity pledges on investments, promotion among senior executive ranks, and recruitment of new employees.

Accordingly, companies should tell investors whether they have equitable employee benefits, nondiscrimination policies, and employee support groups, the New York fund wrote in the statement. In the proposals at both Lennar and International Paper, New York referred to the companies’ own disclosures about inclusivity in the workforce and respect for diverse backgrounds, and their general statements about fostering high-performing workplace cultures via their diversity efforts. New York holds about $15.8 million in International Paper stock and $33 million in Lennar stock, according to the fund’s 2023 asset listing. 

Both proposals quoted a 2019 report from the U.S. Chamber of Commerce Foundation, “Business Success and Growth Through LGBT-Inclusive Culture.” “Companies that adopt LGBT-inclusive practices tend to improve their financial standing and do better than companies that do not adopt them. Additionally, employees, regardless of their sexual orientation or gender identity, express greater job satisfaction at companies where these practices are in place.”

Miami-headquartered homebuilder Lennar’s board wrote that the company was “built on a culture of inclusivity” and brings together the best talent to drive the success of the “Lennar family.” The board said its “Everyone’s Included” initiative represents an evolution of that focus, including an advisory council that brings together diverse cross-representation. Its code of ethics and business conduct already specifically prohibits discrimination and harassment on the basis of “color, religion, sex, sexual orientation, gender identity or expression, national origin, age, disability, veteran status, genetic information, or any other legally protected status,” the board said. “Producing the proposed report is unnecessary and inefficient.”

International Paper board members said its annual report discussed diversity and inclusion initiatives, including its long-term goals. “Among the Company’s primary Vision 2030 Goals, the Company aims to promote employee well-being by providing safe, caring, and inclusive workplaces and strengthening the resilience of its communities,” the board said (emphasis in original).

The company also has a global diversity and inclusion council and employee networking groups. “Requiring the Company to produce an additional report limited to a subset of its overall diversity, equity, and inclusion efforts would prove unduly burdensome for the Company, divert time and attention of Company management, and give rise to undue expenses, all while providing little to no additional value considering the Company’s robust diversity, equity and inclusion initiatives, culture and disclosure practices, including with respect to LGBTQ+ matters,” the IP board said.

The proposals are an escalation from the fund’s efforts last year, which involved writing letters to 55 portfolio companies that signed the Human Rights Campaign and Freedom for All American Business Statement on Anti-LGBTQ+ Legislation. The campaign prompted new discussions about workplace policies, the state said in an annual report.