$7.9 trillion investor coalition pushes companies for disclosure on global workforces
A coalition of 79 institutional investors with nearly $8 trillion AUM, brought together by ShareAction, is putting its muscle behind a demand that companies disclose more information on how they manage their global workforces. Investors are increasingly aware of the evidence that good employment practices contribute meaningfully to financial returns.
The investor group features institutions in 10 countries including Schroders, Amundi, HSBC Asset Management, Axa Investment Managers, Legal and General IM, Nordea, APG, Natixis, AustralianSuper, RPMI Railpen, NEST, and South Yorkshire Pensions Authority. They are backing a survey sent today to 75 mega cap companies listed on 8 international stock exchanges. The investors are founding signatories of the Workforce Disclosure Initiative (WDI), a project devised and coordinated by ShareAction and funded by the UK’s Department for International Development (DfID).
The investors involved want deeper insight into companies’ workforce policies and practices, and to see how firms compare with peers in the same sector in managing workforce risks and opportunities. To avoid multiple surveys and data requests from different investors, the WDI process offers a single survey for public companies backed by this major investor grouping. It is a streamlined solution to the growing problem of survey fatigue and multiplication of effort by both companies and investors.
Companies being surveyed in the pilot year include 50 of the largest FTSE listed firms plus an additional 25 traded on 7 other exchanges. The request is for information covering both developed and developing economies where companies have operations and supply chains. The number of firms will grow rapidly in future years following evaluation of the process in the pilot year. Firms are being asked about their governance of workforce issues, global workforce composition and stability, training and development of people, and worker engagement. Oxfam is preparing on-the-ground case studies highlighting practice in several developing countries where the surveyed companies have operations and suppliers.
The quality of disclosures from companies about workforce management is both weak and inconsistent between comparable firms. The data generated will allow investors to engage with companies in support of smart management of ‘human capital’ as well as about their exposure to the risks of poor workforce practices. The lack of comparable data disclosed by companies is cited as a major barrier to such investor engagement at present.
Jeannette Andrews, Corporate Governance Manager, Legal & General Investment Management, says: “As a large and long-term investor, information on a company’s culture and employee engagement is important to understand the sustainability of business practices and long-term prospects. The WDI provides this disclosure on a consistent and comparable basis, and is therefore an extremely useful format for LGIM to integrate into its assessment of company performance.”
Kelly Christodoulou, Governance Manager, Investments, AustralianSuper, says: “We believe integrating workforce issues into our investment process will improve long-term value and returns for members. In order to fulfil our role as an active owner in relation to these issues, we need to be able to measure how companies manage their workforces. With its strong, collaborative call for better reporting from companies, the WDI is an important step in the right direction.”
Thierry Bogaty, Head of SRI Expertise, Amundi, says: “To perform well over the long-term, companies must take advantage of opportunities to enhance their human capital. The WDI is designed to equip investors with all important data with which to compare companies and encourage a race to the top on workforce issues.”
This significant call for disclosure adds to growing momentum for corporate transparency on social issues, which have often taken a back seat to environmental and governance risks. Progressive firms have already moved towards further disclosure of workforce information. Key pieces of legislation like the 2015 UK Modern Slavery Act and the 2014 EU Non-Financial Reporting Directive have also mandated companies to disclose more. The WDI is the first investor-led process for companies to report on workforce issues across their direct operations and supply chains.
Catherine Howarth, Chief Executive of ShareAction says: “We’re delighted that major investors want to work together to secure the data they need to properly understand this critical aspect of company performance and corporate impact. The Workforce Disclosure Initiative will enable investors and companies to make measurable progress on Sustainable Development Goal 8 which targets decent work for all.”