In 1925, President Coolidge noted in a speech to news editors that “the chief business of the American people is business.” Ninety-three years later, “Silent Cal’s” adage is just as accurate — if not more so. Businesses’ norms and customs hold great sway. Corporate America has experienced a strong recent run with record-breaking profits, a fast-rising stock market, adoption of corporate tax cuts, and rock star status for innovators, financial mavens, and industry titans. However, unprecedented inequality has also emerged. As the richest 5 percent have gained growing shares of income and wealth, the bottom 60 percent have been mired in stagnant wages, eroding benefits, rising risks, and evaporating job stability. Poverty and inaccessible economic opportunities continue to plague the country.
Can we as a business community do better? There’s $9 trillion capital commitment driven by “impact investing” that says we can and we will. Those impact investors are betting big that not only can we do better, but as we do so, there are also solid returns for the lenders and investors who back needed business changes.
That $9 trillion is capital market segment known as “ESG-aligned” investing and financing to business. Those funds are allocated with attention to the target company’s environmental consequences, social impact, and quality of governance structures. To date, the lion’s share of that $9 trillion is driven by environmental sustainability and to a lesser extent governance factors. Social impact — including the effect on employees of a company — has received less attention.
A firm’s people practices are material to its performance and sustainability, so people practices and outcomes should already be an important factor in investing and lending decisions. However, the challenges of data availability, reporting burdens, and lack of adequate benchmarks hinder investors’ and lenders’ direct attention to human capital metrics.
But, with the proper tools, that could soon change. Where data has business value, it is only a matter of time before practical solutions effectively overtop existing barriers. Changes in investing and lending practices are emerging that could bring rapid shifts with major effects on businesses in the next few years.
The Good Companies/Good Jobs Initiative, UpSkill America’s companion program within the Aspen Institute Economic Opportunities Program, is working at a feverish pace on one such solution to the tap the potential of people metrics reporting, analysis, benchmarking, and scoring. Through our new software tool, we are aiding that evolution toward better people practices to serve businesses seeking capital, investors, and lenders.
Our software tool facilitates easy and secure reporting of very reliable data already held by businesses. Akin to credit scoring, data is analyzed and benchmarked with a final scorecard issued to both the reporting firm and the potential lender or investor. This helps all involved measure success and identify opportunities for improvement in people outcomes for employees and the business’ bottom line. Our system also provides investors a gauge of how human capital outcomes correlate with the return and risks of their portfolios. Our approach is one method of generating better information and new services in pursuit of both top-flight business performance and better work design and job quality for our society’s frontline workers.
As business knows so well — money talks. And, increasingly, a sizable segment of the finance and investment pool is aligning to support practical solutions to our economy’s inequities. Will your business be ready?
Ready to measure for good?
Tweet “Poverty and inaccessible economic opportunities continue to plague the country. Can we as a business community do better? There’s $9 trillion capital commitment driven by ‘impact investing’ that says we can and we will.”
Tweet “As the richest 5 percent have gained growing shares of income and wealth, the bottom 60 percent have been mired in stagnant wages, eroding benefits, rising risks, and evaporating job stability.”