Financial insecurity remains a pervasive issue, and there is growing recognition of the role of the workplace in advancing worker financial security. 

As Commonwealth continues to work with employers, it is clear that investors are also an important stakeholder in the workplace – one with influence, and one that can impact change. Investors are also a stakeholder acknowledging their outsized influence in addressing some of these complex issues – be it through the growth in ESG investing (over $17 T in the U.S.), annual CEO letters by industry leaders, or changes in business policies to demand change.

COVID-19 has highlighted the “S” issues in ESG, particularly related to workers and their wellbeing, and the business implications of financial insecurity beyond the core social issue of rising inequalities. That’s where we see the intersection of worker financial security and ESG. 

In partnership with Putnam Investments, Commonwealth hosted a webinar moderated by Executive Director, Timothy Flacke, on how investors can help advance worker financial benefits. Charvi Gandotra, Senior Innovation Manager, presented our joint research, preceding a discussion on worker financial security with Don Baylor of Lafayette Square, Stephanie Dobson of Putnam Investments, and Georgia Levenson Keohane of Columbia Business School. 

Here are four key takeaways from the webinar – 

• Worker financial security is material and has business implications – We are living in a moment where “workers are voting with their feet,” and it’s imperative companies look at the “whole set of worker conditions,” including holistic financial security issues and how they relate to “equity and inclusion,” said Georgia Levenson Keohane. Stephanie Dobson highlighted Levi Strauss’ Worker Well-being program which promotes the physical and financial wellbeing particularly of women workers in factories. While they put a lot of resources in the program, they are seeing a 4:1 payback in productivity. 
• Worker financial security goes beyond wages – Wages, while foundational, are not sufficient to advance workers’ wellbeing. Companies are increasingly offering solutions beyond financial literacy and 401k matches, often looking to their existing vendors and partners to provide them. Keohane emphasized the “uncomfortable truth” about the “10:1 racial wealth gap” and the tie of holistic workplace benefits to racial equity work, saying “perhaps impact here can lead to wealth building and equity.” Don Baylor made an important point on the wide range of solutions often being overwhelming, and that it can be “difficult for employers to weed out the bad from the good.” 
• Measurement is hard, but that is an opportunity – Stephanie Dobson noted that aspects like culture, management aptitude, and trust are all hard to measure, yet good investors and effective leaders think a lot about those issues. This creates investment opportunities for investors who are willing to do the hard work. While there has been some improvement in primary data reported by companies, and fintechs are using innovative data for “S” assessment, work remains to be done, and investors advocate for better disclosures by companies. To realize the benefits of worker financial security, workers need to be financially secure, making it important to look at uptake, usage, and impact of benefits by income, gender, and race. 
• There’s work to be done – We see a role for a range of stakeholders to make meaningful progress on these goals. 
  • Investors need to engage their portfolio companies about worker financial security practices. Forward-looking investors are seeing the potential and asking questions. “80% of my job is just trying to ask better questions everyday,” said Stephanie Dobson. The questions range from understanding the rationale of decisions impacting worker wellbeing to assessing the impact of those decisions. “A credible answer involves two-way communication between management and employees,” said Dobson.  
  • Employers need to offer solutions that meet their employees’ needs, articulate the materiality of their decisions, and disclose relevant data to engage investors. Stephanie Dobson highlighted their assessment of leadership across four criteria: 
    • (i) materiality – if employee issues are material to this business, e.g., a retailer, do you have a plan for it?
    • (ii) proactiveness and creativity – going beyond box-checking and compliance to make meaningful progress
    • (iii) transparency – setting and articulating clear goals, and tracking towards them in a consistent way
    • (iv) impact/influence – sharing learnings and best practices to influence wider action 
  • Financial service and benefits providers need to design and deliver user-centric solutions. 

Everyone has a role to play in prioritizing “S.” Join us! Commonwealth is seeking partnerships to integrate worker financial security into investment processes. If you would like to learn more, please contact Charvi Gandotra at cgandotra@buildcommonwealth.org.