Nina Roth, Director of Responsible Investment at BMO Global Asset Management, reflects on the social impact of business following a roundtable on the case for better workforce reporting and fair wages, in partnership with ShareAction’s Workforce Disclosure Initiative.
By 2024, over 50 per cent of global assets will be invested according to environmental, social and governance (ESG) principles: a step in the right direction.
While it’s often clear what this means for the environment aspect of ESG: investing in renewable energy, reducing emissions and protecting ecosystems, it’s less clear when it comes to the “S”.
That’s why BMO Global Asset Management is a signatory of ShareAction’s Workforce Disclosure Initiative (WDI). The WDI brings together over 130 investors to call on companies to disclose more information about their workforce practices.
From contract types and employment models to the median pay-gap and commitments on diversity, the WDI is looking to make more data available to investors concerned about the social impacts of business, which we are seeing more and more clients and investors are interested in.
Investors and companies rarely get the opportunity to discuss the collective challenges they face as advocates of sustainable business and responsible investment. This is why it was fantastic to see representatives from the investment community and companies at BMO’s London headquarters on 25 September to do just that.
Here are three things that emerged from this exchange:
1. Reports and yet more reports
Demand on companies to report on different initiatives has significantly increased in recent years and survey fatigue is hitting hard. Standardised metrics would make it easier for companies to respond to reporting requests and investors to analyse emerging trends.
The WDI is unique in its depth and breadth, but it also aligns with many other reporting standards including the Global Reporting Initiative, Ethical Trading Initiative and the Corporate Human Rights Benchmark. This makes it easier for companies to aggregate data and should cut down on the amount they generate.
2. Gaps in disclosure are useful
It’s often not a lack of willingness to disclose information that is a barrier for many companies. For many, the data is not available in the first place.
As it’s always said, you can’t manage what you don’t measure. For companies, the gap identified through the survey is the first step towards more comprehensive future data collection. For investors, meanwhile, it helps structure their company engagement and work out if there are any risks that must be considered.
3. More data is needed on fair wages
I’m an advocate of paying people fair wages. Companies that pay a living wage often see increases in employee productivity and performance, reduced staff turnover and improved customer satisfaction; it can make companies more competitive and enhances shareholder value creation in the long-term.
But, I understand there needs to be stronger evidence available for companies to make this case internally. That’s why disclosure on what people are paid is so important so we can identify more trends and build out analysis in this area.
Why does any of this matter?
If social risks are not managed effectively, they fuel rising inequality and hamper progress towards securing decent work for all. A Department for International Development report this month revealed over 70% of respondents from the UK want their own investments to avoid harm and achieve good for people and planet.
There’s a profit-based argument too. Companies with lower turnover rates, higher satisfaction levels and better gender and ethnic diversity often see more favourable financial returns than their counterparts.
As the regulatory landscape shifts to consider how we treat the people behind the profits, we think it’s smart to be ahead of the curve.
There’s still time to complete this year’s WDI survey. Get in touch with Company Engagement Manager, Rosie Mackenzie [firstname.lastname@example.org] before 21 October 2019.