NEW YORK--(BUSINESS WIRE)--Schroders, a global asset manager, has today released a novel approach for the investment analysis of human capital management, evaluating the systems deployed to optimize the performance of a company’s workforce. Created with academic support from the Oxford Rethinking Performance Initiative at Saïd Business School, University of Oxford, and in partnership with California Public Employees’ Retirement System (CalPERS), the analysis confirms that human capital is a clear driver of company productivity and profitability and that companies with durable management frameworks create stronger returns and value for investors.
Human capital refers to the capabilities of an organization's workforce, including skills, experiences and relationships, available to the organization to create economic value. Strong human capital management systems can be deployed through a combination of operating model and workforce strategies, culture and inclusion, incentive and performance management, talent and learning, and innovation.
“As the corporate landscape evolves in a more volatile market, a company's workforce is integral to its performance,” said Marina Severinovsky, Head of Sustainability, North America at Schroders. “However, the market has lacked distinct, quantitative ways to analyze these factors as tangible assets. This research allows us to identify companies that are leaders and laggards in human capital management to make informed allocation and engagement decisions.”
Top-line findings and takeaways from the empirical analysis include:
- We can define and measure what the outcomes of good human capital management look like, and why we see structural and cyclical reasons to focus on this currently.
- Human capital returns are positively correlated with forward excess returns (those exceeding a relevant benchmark or index) over multiple time horizons and across a majority of sectors, even after controlling for Return on Capital Employed and adjusting for a variety of factors.
- There are multiple paths to human capital management affecting balance sheets and profit and loss.
- This being said, there is risk associated with focusing too much on an objective measure for human capital. Human capital analysis must combine qualitative and quantitative assessment. With KPIs to identify good human capital management, we can consider the drivers of change, and show how to optimize human capital productivity.
“This research tells us that investors should not ignore human capital management in evaluating investee companies,” said Angus Bauer, Head of Sustainable Research. “As we approach continued economic volatility, our research shows that companies with strong human capital management are likely to be more capable of navigating the future effectively. Even as the integration of artificial intelligence across industries evolves, the relevance of people as the stewards of value creation will remain high.”
More information about the research and its findings can be found here. This framework is additive to Schroders’ Engagement Blueprint, which outlines priorities and approaches for engaging with companies.
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Founded in 1804, Schroders is one of Europe’s largest independent investment management firms by assets under management. As at 31 December 2022, assets under management were £737.5 billion (€831.3 billion; $887.2 billion). The founding family remain a core shareholder, holding approximately 44% of the firm’s shares. Schroders has continued to deliver strong financial results. It has a market capitalisation of circa £7 billion and employs over 6,100 people across 38 locations.
Schroders has benefited from the most diverse business model of any UK asset manager by geography, by asset class and by client type. Schroders offers innovative products and solutions across their five business areas of solutions; institutional; mutual funds; private assets & alternatives; and wealth management. Clients include insurance companies, pension schemes, sovereign wealth funds, endowments and foundations. They also manage assets for end clients as part of their relationships with distributors, financial advisers and online platforms. Schroders’ Wealth Management offering reflects their strategic ambition to provide wealth management and financial planning services to clients across the wealth spectrum.
Schroders’ strategic aims are to grow their asset management business, build closer relationships with end clients and expand their private assets and alternatives business. Schroders’ purpose is to provide excellent investment performance to clients through active management. The business channels capital into sustainable and durable businesses to accelerate positive change in the world. Schroders’ business philosophy is based on the belief that if we deliver for clients, we deliver for Shareholders and other stakeholders.
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Important Information: All investments involve risk, including the loss of principal. The views and opinions contained herein are those of Schroder Investment Management North America Inc.’s (SIMNA Inc.). These views and opinions are subject to change. This communication is intended to be for information purposes only and it is not intended as promotional material in any respect. SIMNA Inc. is registered as an investment adviser, CRD Number 105820, with the US Securities and Exchange Commission and as a Portfolio Manager, NRD Number 12130, with the securities regulatory authorities in Alberta, British Columbia, Manitoba, Nova Scotia, Ontario, Quebec and Saskatchewan. It provides asset management products and services to clients in the United States and Canada. Schroder Fund Advisors LLC (SFA) markets certain investment vehicles for which SIMNA Inc. is an investment adviser. SFA is a wholly-owned subsidiary of SIMNA Inc. and is registered as a limited purpose broker dealer with the Financial Industry Regulatory Authority and as an Exempt Market Dealer with the securities regulatory authorities in Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Quebec, and Saskatchewan. SIMNA Inc. and SFA are indirect, wholly-owned subsidiaries of Schroders plc, a UK public company with shares listed on the London Stock Exchange. Further information about Schroders can be found at www.schroders.com/us or www.schroders.com/ca. Schroder Investment Management North America Inc., 7 Bryant Park, New York, NY, 10018-3706, (212) 641-3800.