How companies are approaching labour market issues in the current environment is going to be a major issue in terms of environmental, social and governance (ESG), particularly as a risk and opportunity point for investment.
Amanda McCluskey, head of sustainability and responsible investment at Colonial First State Global Asset Management (CFSGAM), said one of the major ESG issues in the listed market space over the next couple of years will be how companies have dealt with the downturn in terms of employee treatment, and it is something that is not being considered enough.
“It was only a year ago when we had CEOs coming in and telling us the challenges that they were facing in terms of attracting and retaining key employees. When the market picks up again and the labour market becomes tight again, the companies that have dealt with their workforce in the most proactive way over this market will be better positioned,” McCluskey said.
She said human capital is relevant in relation to risk and opportunity.
“If you’re an analyst who’s looking at companies and you want to try and find an investment signal on a long-term position that you want to take in a company, how companies are approaching labour market issues in this tough environment I think is a really insightful factor into management quality and the time frames that management take,” McCluskey said.
“So if management’s really sort of very short term and focused on managing the balance sheet in a very short-term way and just wants to cut costs, they will have cut employees. Whereas if a company’s more long term in focus and wants to grow the business and keep the key employees, they won’t have been as harsh in their cutting of costs in terms of employee costs.”
McCluskey said it is an area CFSGAM is looking at in order to gain a better understanding of how companies are approaching the labour issue.
“I think in terms of the ESG at the moment, they’re all focusing on governance because the global financial crisis has demonstrated how important governance is. And then probably the second most talked about issue is definitely carbon trading.”
