Commentary: The central role of investors in the financial security of workers

Employers can help raise wages further by offering other financial security benefits, and even tying those benefits to pay raise times. A Commonwealth study found that pay rises often cause workers to rethink their finances and make them want to save more. Employers could further strengthen their employees’ financial security and capitalize on pay rise times by offering well-designed benefits that allow employees to save money and better manage their finances by improving their messaging and increasing tracking and disclosure.

In order to consider financial security as part of ESG measures, there are a number of best practices for investors.

  1. Collaborate closely with companies. Investors can work directly with companies to understand the state and importance of employee financial security and to assess the effectiveness of the company’s decision-making regarding related benefits, particularly if these benefits are used. by and support low- and middle-income employees who need it most. them.
  2. Encourage relevant disclosures. Investors can encourage corporate disclosures that go beyond basic salary information to present a more relevant and comprehensive view of employee financial security. Of course, the specific metrics that are relevant will vary depending on the context of a particular business and should be determined strategically.
  3. Articulate the materiality of financial security. There is strong evidence linking employee financial security to things important to business performance, such as productivity and employee turnover. Investors can seek to assess the links between these indicators, companies’ long-term financial performance and investment performance, helping to broaden and refine materiality analysis over time.

The pandemic has exposed the treatment of low-wage workers and their critical role in the success of a business, as well as the health of the community. With investors joining in the important work of improving their financial security, we can elevate and reward workers as key business stakeholders who play an essential role in our economy.

Charvi Gandotra is senior chief innovation officer and Nick Maynard is senior vice president of Commonwealth, a nonprofit organization that seeks to build financial security and opportunity for financially vulnerable people. Ms. Gandotra is based in New York and Mr. Maynard is based in Boston. This content represents the opinions of the authors. It has been submitted and edited according to P&I guidelines but is not a product of the P&I editorial team.

Sarah J. Greer