9 MIN REPORT
The skills, knowledge and experience of the people involved in a company can drive growth
Social issues are the S in ESG (environmental, social and governance), and our ESG research recognizes the materiality of human capital. Our analysis has identified some key aspects of human capital that are especially important. For instance, how does management attract, develop and retain the right people? Is there a diverse culture, and are there positive labor relations?
Quantitative data is critical, but a lack of transparency makes it difficult to effectively measure human capital management. Disclosure is sparse and inconsistent when it comes to key indicators like compensation, diversity, training programs or safety records.
Most industries will be materially affected by ongoing human capital trends, if not experiencing the impacts already. Increased systematic human capital disclosures are an opportunity to understand and identify those companies able to create a competitive advantage.
In this report, Matt Lanstone, Capital Group's head of ESG research and investing, and Emma Doner, ESG senior manager, identify five essential indicators to measure human capital and explore examples of recent trends that can help or hurt a company's value.