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Sustainability Focus - 24/07/2019

Human Capital: a key asset not yet fully appreciated by the financial industry

This paper aims to assess 792 financial companies rated by Vigeo Eiris on their ability to enhance opportunities and limit risks in relation to their human capital.

Human capital is defined by the OECD as “the knowledge, skills, competencies and attributes embodied in individuals that facilitate the creation of personal, social and economic well-being”.

According to Vigeo Eiris methodology, which is rooted in international standards, such as International Labour Organization Conventions and Recommendations, UN Declarations and OECD Guidelines, human capital development is a key asset for companies and is closely linked with organisational success. Indeed, a company’s capacity to attract and retain talent, and to create a cohesive and cooperative workplace, is strongly influenced by the way in which it manages workforce issues including restructuring, respect of labour rights, prevention of discrimination, career management, and improvement of health & safety conditions.

Key takeaways

  • Vigeo Eiris has an overall limited assurance on the financial industry’s ability to manage its human capital development in a proactive and responsible way.
  • Disparities exist amongst sectors and between geographical regions. Diversified Banks in Europe and Asia Pacific appear to achieve the most robust performances (57.2/100 and 51.9/100, respectively) in terms of human capital development and risk management. The weakest performances appear to concern companies in North American and Emerging markets.
  • At a global level, the Diversified Banks sector achieves – on average – the best performances across the most relevant topics, namely restructuring, labour rights, prevention of discrimination, career management, and improvement of health & safety conditions.
  • Focus: Digitalisation and automation will continue to bring structural adjustments to the composition and size of the banking industry workforce. In 2018, UNI Europa Finance1, suggested that solutions to mitigate the impact of digitalisation on sector employees include continuous training and lifelong learning to maintain employees’ skills, and the provision of healthy working conditions and an appropriate work-life balance. Vigeo Eiris’ study, however, shows that only a minority of banks describe training programmes aimed at promoting the employability and lifelong learning of all employees, including older workers. The study also demonstrates that the sector has not been able to avoid redundancies or to limit the impact of reorganisation through, for example, internal mobility or re-training.
  • Financial companies face severe controversies in relation to restructuring, health & safety, non-discrimination and labour rights. With particular reference to allegations faced by the Diversified Banks sector, it could be argued that the size of these companies implies that they are more exposed to stakeholder scrutiny.

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Keywords : Discrimination, ESG, Human Capital