Investment markets can only ever be as healthy as the environment and communities that support them

25 September 2023

As investors, our overall aim is to meet financial objectives. To achieve this, we require healthy investment markets and investors have a key role to play in working with the investment industry to drive positive and lasting change to address systemic risks that threaten communities, the environment and ultimately the markets in which we invest.   

Healthy markets, healthy investment portfolios and healthy returns, require healthy communities and a healthy planet. Therefore, effective stewardship and engagement is a key enabler of strong, long-term investment performance. At CCLA we have always believed that the primary role of sustainable finance is to drive positive change ‒ and never before has the role of active ownership been more relevant or more necessary. As investors, we also need to get smart about what does and doesn’t bring about change. If we think about those organisations whose mission it is to bring about positive change, we might think of charities or foundations. They focus their time and resource on areas and communities where the need is greatest and avoid those that need it least.

Investor influence can help tackle some of the main issues that are facing society and businesses.   

Here is a summary of some of the key initiatives that CCLA has been working on aimed at tackling some of the biggest problems facing society today.

Mental health in the workplace matters

According to Mind, the mental health charity, ‘smart employers know that organisations are only as strong as their people – they depend on having a healthy and productive workforce.’¹

Protecting and promoting good workplace mental health is a business imperative, relevant not only to a company’s duty of care to its employers but also to its bottom line. It is potentially material to long-term value creation and a relevant consideration for investors when forming views on companies and sectors across global capital markets.

There is clear evidence to show that improving the mental health of an organisation saves money and that the financial ramifications of failing to improve corporate mental health are profound. According to a study by Deloitte, mental ill health in the workplace costs employers annually an average of £1,652 per private sector employee.²

Perhaps more importantly, creating a positive environment for mental health costs a lot less than failing to do so. In the UK, Deloitte finds an average return of £5.30 for every £1 invested in mental health interventions in 2020‒21.³ Globally, the World Health Organization (WHO) tells us that for every US$1 put into scaled-up treatment for common mental disorders, there is a return of US$4 in improved health and productivity.⁴

There may be no shortage of mental health initiatives in the international workplace, but when it comes to integrating mental health into formal management systems and processes, most global companies have much further to go.

CCLA believes that investors have a key role to play in supporting and encouraging companies to strengthen their approach to workplace mental health. Appropriate action by employers not only improves the quality of people’s working lives, it also brings financial benefits at a corporate level, which means that investors stand to gain too.  

Nutrition – how investors can play a role in improving public health

Good nutrition is fundamental to good health, yet humankind is experiencing a growing epidemic of diet-related ill health and the voluntary action that investors can play in affecting commercial change has increased in importance and urgency. 

Diet-related ill health places an extraordinary burden on health care systems, governments and insurers around the world. To tackle the problem, governments are beginning to adjust the regulatory landscape, for example the introduction of sugar and calorie taxes that have been introduced in 50 jurisdictions in the world. This indicates that there are increasing financial repercussions for companies that fail to transition their business models towards healthier products and sales.

In June 2022, the government published its food strategy policy paper, which set out long-term measures to support a food system that offers access to safe, healthy and affordable food for all. However, following the significant change that followed in the government, several anti-obesity measures, including advertising restrictions on ‘junk food’, were delayed until 2025. This was disappointing news for the investor group. With government-imposed mandatory reporting on nutrition more distant than ever, CCLA refocused attention on voluntary steps that companies can take to address the obesity crisis.

Commercial organisations – those designing, manufacturing, advertising and selling unhealthy food and drinks – have a direct influence on our eating habits. Investors can be a driving force in raising ambition on mandatory nutrition reporting and holding industry to account. As investors, we can identify where a company may be missing out on the opportunity to grow in healthier products and categories. We can engage where a company is failing to see the public health impacts of its own work through the eyes of regulators and where its food portfolio may be more at risk from changing legislation than its peers. We can push for more responsible marketing and clear nutritional labelling and address concerns about a company’s approach to food manufacturing. 

Through engaging with companies on nutrition, we can make business models more resilient and play a role in improving public health.

How to Find, Fix and Prevent modern slavery

While the true extent of modern slavery is hidden from view, it is estimated that there are 40 million modern-day slaves in the world. It is a human tragedy, but it also impacts the business and investment community. In the UK, for instance, the Global Slavery Initiative estimates that we import goods worth an estimated $18 billion each year that, in all probability, used slave labour in their production.

Consequently, we believe that companies have an obligation to identify the victims of modern slavery in their supply chains and direct operations, and then effectively support the provision of remedy to those victims. CCLA has formed an unlikely coalition between the investment industry, non-governmental organisations and academics to develop a new approach. Our Find it, Fix it, Prevent it programme asks companies: what are the outcomes of your anti-slavery efforts? We go beyond evaluating policies and look for results.

Although is it still early days, this programme is already having impact and has led to companies commissioning new work and efforts to genuinely find and help people in difficulty rather than pretending that they did not exist. This collaboration can change lives, and we like to think it already has.  

By working collaboratively, investors can truly affect change in the real world. Momentum in the investment industry is growing, however the value of our portfolios and the health of our environment and communities, depends upon investors coming together and driving the change that matters most.