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Impact Brief: Caretaking and Human Capital

Why we’re leading an investor project on paid family leave

Click for a recap of our impact investing work on paid family leave.

At Zevin Asset Management, we’re committed to socially responsible investing on behalf of our clients. That means building portfolios by researching key environmental, social and governance (ESG) issues. Then we raise our voices as investors: meeting with company executives, launching shareholder proposals, and moving firms toward social justice and sustainability. That process of shareholder advocacy (sometimes called “active ownership” or “impact investing”) creates lasting, positive impact — and it’s at the heart of what we do.

We began using investor advocacy to tackle paid family leave last year and, as featured in a recent issue of Fortune, we have already helped create lasting change. Read on and watch our video (above) for more on our approach.

Paid family leave is an investment issue

America faces a caregiving crisis. Approximately 87 percent of private sector workers in the United States do not have access to a single day of paid family leave (Bureau of Labor Statistics, 2016). One in four new mothers returns to work just 10 days after giving birth (Chicago Tribune, May 2017).

Workers at Walmart, Starbucks and elsewhere are winning paid family leave. Investors — in coalition with PL+US and Organization United for Respect — helped get it done.

That makes paid family leave a critical economic challenge, as well as a material issue for large employers and investment portfolios. Federal inaction on paid family leave has increased pressure on large employers to improve their policies for all employees. But Corporate America’s response is lopsided: virtually all low-income working Americans still have no access to paid family leave (Bureau of Labor Statistics, 2016), and companies’ approaches frequently ignore non–birth mothers like fathers and adoptive parents.

At the same time, markets are beginning to pay more attention to social risks in investment portfolios. Investors large and small increasingly understand that gender inequality and human capital management (how good benefits and job conditions support effective workers) can drive risk and opportunity. Socially responsible investors like Zevin Asset Management, along with gender-lens investors and even some traditional investment firms, are analyzing and acting on issues at the intersection of gender justice and sound human capital management — issues such as gender pay gaps, gender sensitivity in product development, diversity and inclusion practices, and recruitment/retention of women in executive leadership.

Last year, we decided it was time for responsible investors to ask companies about paid family leave policy, and push big employers in the right direction.


Risks & opportunities

The investment case for action on paid family leave is clear. When companies mismanage paid family leave, they contribute to inequality and risk:

  • Federal inaction on paid family leave has left workers without options and increased pressure on large employers to enhance benefits.
  • Corporate inaction adds to parents’ challenges in the workforce, leading to retention issues and higher turnover, loss of high quality talent, and diminishing diversity levels.
  • Policies that exclude adoptive parents harm LGBTQ workers, who are four times more likely to parent adopted children and six times more likely to raise foster children.
  • Unequal family leave can lead to litigation risk: last year, the Equal Employment Opportunity Commission sued Estée Lauder, citing disparities between paid leave for mothers and fathers.

When companies properly manage paid family leave, they can access opportunities:

The New York Times noticed when companies began to respond to investor pressure on paid family leave.
  • In a 2018 report in The New York Times, a Starbucks official stated that an improved approach to paid family leave “brings the talent we’re looking for, and industry-leading retention.”

What can companies do?

Zevin Asset Management developed an investor engagement plan aimed at moving companies to address paid family leave. Throughout 2017, we met with large employers and consulted with PL+US: Paid Leave for the United States to develop benchmarks for company practice.

We found that corporate paid family leave approaches can improve for families — and reduce risks to investors — in three key ways. We expect major U.S. employers’ policies to:

  1. Be equal
    …between classes of employees, salaried/hourly, full-time/part-time, corporate office/field.
    …between new parents regardless of gender or family circumstance. Providing an additional six to eight weeks of short-term disability for those employees who give birth is acceptable.
  2. Be adequate…
    …in length for the health of newly arrived children and birthing mothers and provide the necessary bonding time for new parents.
  3. Be accessible…
    to all employees. Policies should be easy to find and understand, and managers should encourage employees of all genders to fully utilize their paid family leave.
    …with appropriate transparency for the public and investors.

Investors act

Last year, Zevin Asset Management wrote to more than a dozen U.S. firms whose policies are inadequate because they don’t meet the needs of modern families or they are unequal between types of parents/classes of workers.

We began productive dialogues with several companies, we met with executive management, and we filed shareholder proposals at companies where we were concerned about a lack of progress. Shareholder proposals asking companies to consider enhancing their approaches to paid family leave were filed at Starbucks, CVS Health, Walmart Stores, and YUM! Brands.

In that work, we were joined by investors: Arjuna Capital, Impax, Reynders McVeigh, Friends Fiduciary Corporation, Loring, Wolcott & Coolidge, OUR Walmart, Benedictine Sisters, and The Interfaith Center on Corporate Responsibility.

Companies respond

Companies are moving in response to engagement and increasing public interest in positive worker policies. All four of our shareholder proposals led to progress (without going to a vote at annual meetings), and dialogues have also been successful. For example:

  • Starbucks extended paid family leave benefits to fathers and adoptive parents regardless of whether they work in corporate roles or as baristas in stores.
  • CVS Health added a broad-based four-week benefit for all full-time parents (including birth mothers, fathers, adoptive parents, and foster parents). This is added to the existing six-week short term disability benefit for those employees who give birth and extends a lifeline to dads and adoptive parents.
  • Walmart had previously not given hourly workers who were non-birthing parents any paid leave and had given hourly birthing mothers only partial pay for six weeks. In January 2018, the company announced it will give the same parental leave to salaried employees and full-time hourly employees: 16 weeks for birthing mothers and six weeks for all other parents, fully paid. This policy change impacts about 500,000 families and sets a new basic standard in the marketplace.
  • Over the next 18 months, YUM! Brands will review extending additional paid family leave benefits.
  • After an autumn 2017 meeting, The TJX Companies made a modest four-week extension to its policy.

The way forward

We now have an impact investing model to move companies toward better paid family leave. In a time of tax reform and soaring corporate profit, investors have argued successfully that companies should deploy resources toward this critical benefit, among other long-term human capital investments.

Moreover, recent progress at the companies mentioned above signals a wave of action among corporations and a potential watershed moment for paid parental leave in the U.S. As the labor market tightens, more and more companies are positioning themselves to attract and keep talent with incentives such as paid family leave and other family-friendly policies.

Zevin Asset Management helped Organization United for Respect design a shareholder proposal to bring change at Walmart.
Paid family leave policies that leave out hourly or part-time workers, that ignore fathers and adoptive parents, or that do not provide adequate length of leave for families to bond with newly arrived children will no longer suffice. In short, we believe that the “Paid Leave Arms Race” that has played out in the professional services, financial, and knowledge economy sectors is moving swiftly into the service and retail sectors. All large U.S. employers should be on notice.

So, we will continue urging companies across our clients’ portfolios to revisit their approach. Our continuing work includes the following:

  • In June, Zevin Asset Management launched a big investor statement aimed at guiding companies on effective paid family leave policy. More than 50 investment institutions with combined assets of $169 billion signed our Investor Statement on Paid Family Leave— showing companies that financial experts are keenly interested in this issue.
  • This summer, we took our message to Washington, sending an official statement to a Senate subcommittee hearing on paid family leave. Our submission laid out the investment case for action and encouraged lawmakers to support workers and companies.
  • And through 2018 and 2019, in coalition with fellow impact investors, we will begin engaging with a larger group of companies. Onward!

Stay tuned for more on our impact investing initiative. If you’d like more information, or you want to get involved, contact Pat Miguel Tomaino at Zevin Asset Management (pat@zevin.com).


Disclosures:

  1. Registration with the SEC should not be construed as an endorsement or an indicator of investment skill, acumen or experience.
  2. Investments in securities are not insured, protected or guaranteed and may result in loss of income and/or principal.
  3. This communication may include opinions and forward-looking statements. All statements other than statements of historical fact are opinions and/or forward-looking statements (including words such as “believe,” “estimate,” “anticipate,” “may,” “will,” “should,” and “expect”). Although we believe that the beliefs and expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such beliefs and expectations will prove to be correct. Various factors could cause actual results or performance to differ materially from those discussed in such forward-looking statements.
  4. Unless stated otherwise, any mention of specific securities or investments is for hypothetical and illustrative purposes only. Zevin Asset Management’s clients may or may not hold the securities discussed in their portfolios. Zevin Asset Management makes no representations that any of the securities discussed have been or will be profitable.
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