How expanding the 'S' in ESG helps workers, employers, and investors
A growing number of companies are implementing financial wellness initiatives, not just to help employees, but to meet investor demands.
Publicly-traded companies implementing environmental, social and governance (ESG) goals need to expand the “S” to go beyond offering decent wages, by finding additional ways to support workers’ financial well-being. And investors need to hold them accountable, according to a new report by the Boston-based nonprofit Commonwealth and the Sustainable Investing Team at Putnam Investments.
A ‘win, win, win’ situation
Helping workers to be more financially secure also helps the employer’s bottom line – a win, win, win for workers, employers and investors, says Commonwealth’s senior vice president Nick Maynard.
“Employees’ financial stress costs companies billions of dollars in lost productivity, absenteeism and turnover,” Maynard told BenefitsPRO. “So focusing beyond just wages really is material to corporate success.”
How these companies are helping
Financial literacy programs in the workplace are a good start, but a growing number of companies are implementing additional financial wellness initiatives, according to the report:
UPS: UPS launched an emergency savings initiative for 90,000 employees, helping them set aside liquid after-tax savings “easily and automatically” as part of their 401(k) administered by Voya Financial.
Abbott Laboratories: Abbott Laboratories’ Freedom 2 Save Program matches student loan payments into 401(k) plans for employees who qualify and contribute at least 2 percent of their pay to student loans.
Levi Strauss & Co.: Levi Strauss & Co. established its hardship fund, the Red Tab Foundation, in 1981 and has distributed more than $35 million to date. In 2015, the foundation partnered with the nonprofit SaverLife to create a matched savings platform to help employees build emergency savings.
Walmart: Walmart’s Associates in Critical Need Trust offers the Together Fund to provide eligible workers with financial assistance after an unexpected, unavoidable event. Workers are eligible to receive up to $1,500.
Include all workers
Employers should pay particular attention to workers who have low to moderate incomes, by offering liquid emergency savings solutions, hardship funds, credit-building products, children’s savings accounts and employee stock purchase plans, according to the report. Moreover, benefits generally offered to higher-paying workers, such as retirement plans and health savings accounts, should be extended to everyone in the workforce.
“When you think of what we just went through with COVID – we wanted those grocery store shelves to be stocked and the cashiers to be moving quickly,” Maynard said. “If we want workers like these to be productive, they not only need a living wage, but additional resources to help their financial security.”
Communicate benefits clearly
Employers should make sure financial wellness offerings are communicated clearly to workers through well-designed benefit launches, straightforward sign-up processes and ongoing messaging help to improve utilization and positive impact for workers, according to the report.
Track impact of benefits
Employers should also monitor and track the positive impact of these benefits, especially for LMI workers. Measuring the positive impact to the bottom line in terms of increased productivity, reduced absenteeism and turnover – and disclosing those metrics to investors — is also a smart idea.
How investors can hold companies accountable
Investors can encourage accountability. Commonwealth recommends these best practices for investors:
Work directly with companies. Investors can work directly with companies to understand the state and importance of employee financial security and to assess the effectiveness of corporate decision-making around related benefits, particularly whether those benefits are used by and support the LMI workers “who most need them.”
Encourage more extensive corporate disclosures. Investors can encourage corporate disclosures that go beyond basic wage information to present a more relevant and complete view of employee financial security.
Analyze connections between wellness and performance. Investors can work to assess the links between financial wellness benefits and long-term corporate financial performance and investment performance, helping to expand and refine materiality analysis over time.
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