Within the last few weeks, two major initiatives have emerged seeking to require companies to provide extensive disclosures surrounding human capital management practices. The first was a survey initiative launched by a coalition of a EU and UK investors and the second was a SEC rulemaking petition sponsored by a group of U.S. pension funds and investors. The push to require companies to provide extensive information on environmental, social, and governance (ESG) factors has reached new heights over the past 18 months. The increase in activity has been accompanied by a notable shift regarding how ESG initiatives are being pushed on companies. For years, activists would seek to impose new requirements by putting pressure on companies directly. However, more recently activists have eschewed the approach and instead begun to target the investors which own the companies. The strategy seeks to put pressure on the investors, as owners of the company, to require the disclosures.
Regarding human capital metrics, ESG initiatives have long pushed for their inclusion, to a degree, within the larger ESG context. More recently, however, multiple initiatives have emerged which specifically focus on human capital management metrics to a degree previously unseen. The two initiatives, which are detailed in the attached Center Policy Brief, are the latest attempts to introduce develop and gain acceptance of human capital management disclosure standards. In addition to voluntary disclosures, advocates pursuing these disclosures will continue to push for government-mandated disclosures. However, absent an unlikely success there, the logical path will to seek to pressure investors into requiring the disclosures among companies they own.