Impact investment groups have voiced support for updated corporate disclosure rules for staffing and worker welfare.
Testifying to the US House Committee on Financial Services Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets last week, this declaration came from representatives of JUST Capital and the US Impact Investing Alliance.
The groups called for politicians to support efforts by the Securities and Exchange Committee (SEC) to improve the amount of information listed companies are required to disclosure about their workforces.
At the start of the hearing — titled “E, S, G, and W: Examining Private Sector Disclosure of Workforce Management, Investment, and Diversity Data” — Republican Representative Bill Huizenga argued such rules would be an overreach by the SEC.
However, Fran Seegull, president of the US Impact Investing Alliance, said: “Transparency and accountability are the hallmarks of efficient markets. The current lack of information creates market inefficiencies, harming investors and weakening the entire financial system. It is in the long-term interest of both individual companies and the wider economy to be responsive in disclosing these factors for investors.”
Cambria Allen-Ratzlaff, managing director and head of investor strategies at JUST Capital, outlined her organization’s research that showed most Americans want companies to pay a fair wage.
In addition, JUST Capital found those companies that perform well on workforce welfare metrics tend to outperform financially.
However, current corporate disclosures relating to staffing only require companies to disclose headcount.
“This reporting standard was set in 1973, when over 80% of the S&P 500’s market cap was property, plant, and equipment,” Allen-Ratzlaff said. “Fast forward 50 years to today, and 90% of the S&P 500 is based on intangible assets. It’s human capital — the collective knowledge, skills, and experiences of the workforce — powering economic growth.
“But as our financial reporting standards have lagged, this also means that up to 90% of company value may not be reflected in companies’ disclosed financials. And investors have taken note.”
She added that, without more information relating to the makeup of company workforces and how they are managed, “investors are flying blind” with regards to understanding how companies are run and how risks are managed.
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