Every day til Christmas, Good With Money is publishing a post from one expert, on how to invest to meet one of the UN Global Goals. Today, Olivia Bowen, partner at Castlefield, the thoughtful independent advisory firm, and Kate Hewitt, executive at Castlefield, talks about investing for “decent work and economic growth”.
A clear front-runner comes to mind when thinking about investments that focus on “decent work and economic growth” – Capital for Colleagues. This fund invests solely in Employee-owned companies, and is listed on the Social Stock Exchange. Capital for Colleagues’ CEO is our own Managing Partner, John Eckersley.
Employee ownership, sometimes called co-ownership, is a proven, successful business model and there are hundreds of businesses in the UK that are owned and managed in this way. It works equally well for young, start-up businesses as well as for more established organisations.
Capital for Colleagues plc (C4C) is focused on investing in mainly UK businesses which demonstrate a genuine commitment to employee ownership, in order to generate an attractive return for shareholders.
They provide patient capital to enable the transition to an employee owned business (EOB) and to existing EOBs for growth using equity, equity-related investment capital (such as convertible loans) and/or debt financing. They issue a Social Impact Report every year, covering five main themes:
- The social and environmental purpose of the company and how impact is delivered
- Who benefits as a result
- How a company delivers its social impact
- How a company involves and consults its stakeholders
- Evidence of the social impact, and how this is collated, measured and reported
The employee-owned sector tends to display a range of favourable characteristics compared to other forms of business ownership:
The Sector – UK EOBs generate a turnover in excess of £30 billion, representing around 4 per cent of the UK’s GDP. The number of EOBs is growing at an annual rate of about 10 per cent with the EOB sector generally outperforming more traditionally-structured firms during times of recession. (Source: http://capitalforcolleagues.com)
Productivity – Quoted EOBs have outperformed FTSE All-Share companies by an average of 10 per cent each year since the Employee Ownership Index began in 1992 (Source: Capital Strategies Ltd). They have also increased productivity year-on-year by 4.5 per cent on average, whereas the UK economy as a whole has been flat. (Source: http://capitalforcolleagues.com)
Cross Party Support – Successive UK governments have promoted employee ownership, and this looks set to continue. The government introduced a number of attractive tax measures in the 2014 Finance Bill.
Alternative Asset Class – Enlightened investors are increasingly looking for an alternative to traditional private equity model; this is therefore an ideal opportunity for portfolio diversification.
Impact Investment – Employee Owned Businesses tend to be managed in a more open and inclusive way, which delivers noticeable social benefits internally and in the communities in which they operate.
Happily, the employee owned business sector in the UK is growing because co-owned companies tend to be more successful, competitive, profitable and sustainable. Because they’re co-owners, staff in employee owned businesses tend to be more entrepreneurial and committed to the company and its success.
The firms tend to have high employment standards, involve staff and give everyone a stake, and so employee owned businesses are better at recruiting and retaining talented, committed staff. In addition, because they’re run in an open way, employee owned businesses tend to have a strong commitment to corporate social responsibility and involvement with the communities they operate in.
The employee owned business sector adds to the diversity of Britain’s economy by offering a vibrant and different model for achieving business success, and is growing because employee ownership is proving to be a durable, successful business model that’s extremely well suited to the challenges of 21st century management.
It’s worth mentioning here that we at Castlefield have recently become signatories to the ShareAction Workforce Disclosure Initiative (WDI). This is a new collaborative engagement programme in which 79 institutional investors will urge listed companies to publish data on their workforce. The data will cover workers in companies’ direct operations and their supply chains. This will allow investors to draw meaningful comparisons between how different businesses treat their employees.
The WDI is modelled on the Carbon Disclosure Project (CDP). Companies will be requested to provide information on the composition of the workforce, workforce stability, workforce development and worker engagement. Participating investors, like Castlefield, will send the first year’s pilot WDI survey to large multinational companies in the UK and elsewhere. The survey will be reviewed and amended to account for the responses gathered and hopefully more companies will be involved in the survey in future.
The initiative is aligned with The United Nation’s Sustainable Development Goals, particularly goal 8 which calls for ‘decent work for all’. Shareholders are well positioned to make a difference and recognise that disclosure and transparency are important first steps to achieving fairness for company workforces.
We are excited to be able to lend the Castlefield voice to a growing number of institutional investors that recognise that good “human capital management” is integral to long-term corporate success.
Sources: http://capitalforcolleagues.com/prospective-sector/; http://employeeownership.co.uk/what-is-employee-ownership/employee-ownership-benefits/