July 2020


This month’s Positive Impact spotlight shines on the timely topic of Human Capital.


Over the past few months, the coronavirus and economic pressures have forced companies to prioritize spending, resources and attention. The need to protect, support, retain and develop employees has emerged as a critical priority. A recent analysis by JUST Capital, a non-profit helping companies improve stakeholder performance, found that the stock returns of companies that prioritized their workers outperformed since the coronavirus outbreak. https://justcapital.com/news/chart-of-the-week-companies-that-prioritize-their-workers-continue-to-outperform/ Employee and human capital assets are part of the social pillar in ESG (environmental, social and governance) analysis and a core investment consideration. 

Human capital addresses the management of a company’s human resources as key assets to delivering long-term value. The Sustainable Accounting Standards Board (SASB) includes human capital as a core sustainability reporting dimension. SASB states human capital includes “issues that affect the productivity of employees, such as employee engagement, diversity, and incentives and compensation, as well as the attraction and retention of employees in highly competitive or constrained markets for specific talent, skills, or education. It also addresses working conditions and the management of labor relations in industries that rely on economies of scale and compete on the price of products and services, and in industries with legacy pension liabilities. Finally, it includes the management of the health and safety of employees and the ability to create a safety culture for companies that operate in dangerous working environments.”  While the coronavirus has forced greater attention on the importance of human capital, the shift to a knowledge- and service-based economy started decades ago, rewarding companies focused on developing and differentiating employees and human capital assets.



How important are human capital assets? In 1975, only 17% of the value of the entire U.S. stock market was attributable to intangible assets such as human capital, intellectual capital, customer relationships, brand value, and other intangibles. In 2015, the value of the stock market attributable to intangible assets increased to 84%.  Conventional accounting does not treat all non-financial assets such as human capital as an asset. Amazon’s warehouses are recorded on their balance sheet. However, their world-class engineering team is not recorded as an asset.  Environmental, social and governance (ESG) analysis seeks to identify and measure how companies are managing their non-financial resources, which are a greater source of risk and opportunity than ever before.


Employees are critical to a company’s success and ability to compete. Consumer spending accounts for over 65% of the U.S. economy. Employees are the face of a company and the connection between a customer and a business. Employees are the intellectual capital of a company and the brains behind medical breakthroughs, technology development and innovation. A recent study also found that employees are critical in capitalizing on sustainability investments and creating shareholder value from ESG initiatives. The research (https://rb.gy/rj2nno) concluded that companies with high employee satisfaction and strong ESG performance outperformed peers. Human capital issues, particularly how employees are treated and incentivized, are growing as top of mind management imperatives for companies and executives.

Weak economic conditions are forcing companies to prioritize investments and spending. Difficult decisions are ahead for many companies, and many will follow the traditional playbook of layoffs. While this may be prudent for industries in long-term secular decline, investments in workers have proven to offer attractive returns for companies and their investors.


Positive Impact Portfolio Strategies


Bigelow’s Positive Impact strategies support investors interested in integrating environmental, social, and governance (ESG) considerations into their portfolios. Research indicates that material ESG issues including corporate governance, carbon emissions, water and waste management and usage, board and management diversity, employee safety and wellbeing, and customer and community relationships are affecting the financial and investment performance of companies and issuers.

Investors may also ascribe additional value to owning companies that are reducing their ESG impact (e.g. low carbon emissions portfolio) or targeting sustainability opportunities (e.g. renewable energy).  In 2015, all United Nations Member States adopted the 2030 Agenda for Sustainable Development which identified 17 Sustainable Development Goals (SDGs). Since the release of the SDGs, “sustainability” has emerged as the preferred term describing investment strategies, private, public and non-profit initiatives, and policies and regulations involving the environmental, social and governance issues identified in the Sustainable Development goals.   (link: https://sustainabledevelopment.un.org/?menu=1300)

Bigelow’s Positive Impact strategies target and prioritize companies and issuers with better than peer performance on the sustainability issues material to their businesses and industries. Portfolios are managed to maintain appropriate diversification, alignment with a client’s individual risk tolerance, and exposure to asset classes appropriate for a client’s return needs. Bigelow utilizes internal and external data and ratings information to develop portfolios with above benchmark environmental, social and governance (ESG) ratings. Ratings seek to measure how well companies assess and manage material ESG risk factors and innovate to create long-term sustainable businesses compared to their industry peers.


To learn more about Positive Impact Portfolios, visit https://www.bigelowadvisors.com/pi/


Sustainability Goals and Standards


Companies should identify material ESG risks and long-term value-creating opportunities and proactively communicate these to investors and stakeholders. Impact and sustainability reporting standards, such as GRI and SASB, are evolving to support companies in disclosing and measuring their progress and impact.

Global Reporting Initiative (GRI) provides sustainability reporting standards. The GRI standards are the first and most widely adopted global standards for sustainability. The standards are rooted in the public interest and take a multi-stakeholder user approach.   https://www.globalreporting.org/standards

The Sustainability Accounting Standards Board (SASB) developed sustainability accounting standards for the U.S. capital markets and takes an investor user approach. SASB’s industry-specific standards target financially material, decision-useful, and cost-effective disclosures. https://www.sasb.org/standards-overview/

Other tools such as the B Impact Assessment (https://bimpactassessment.net/ ) helps companies measure their impact on workers, the community, environment, and customers. The B Impact Assessment guides companies interested in certifying as a B Corporation. Certified B Corporations are businesses that meet the highest standards of verified social and environmental performance, public transparency, and legal accountability to balance profit and purpose.  https://bcorporation.net/certification/meet-the-requirements


Engagement and Advocacy  


Engagement is a critical part of aligning corporate interests and shareholder interests. Bigelow closely monitors the proxy voting guidelines for asset managers used in our Positive Impact portfolios.

Investors have multiple paths to engage with companies and advocate for issues. Proxy voting, direct dialogue, and shareholder resolutions are three methods.













Please see the engagement and advocacy initiatives highlighted in the Positive Impact Spotlight Blogs on Gender Diversity, Water and Governance.




Source: Calvert 2019 Impact Report





Maine Audubon is the largest Maine-based wildlife conservation organization. Maine Audubon has eight wildlife sanctuaries, 10,000 members, 2,000 volunteers and serves 50,000 people annually. The mission of The Maine Audubon Society is to conserve Maine’s wildlife and wildlife habitat by engaging people of all ages in education, conservation and action. Maine Audubon helps people become more informed, effective stewards of wildlife and habit. The three primary focus areas are conservation projects, environmental education, and policy and advocacy.


To learn more about the organizations they support, visit the Maine Audubon website: https://www.maineaudubon.org/