Disability inclusion is shaping up to be the next frontier of ESG investing.
Investors are pushing companies to create more welcoming workplaces for employees with disabilities, whether they use a wheelchair or have a mental illness. Twenty-two institutions managing $2.8 trillion of assets urged corporations in late May to review their policies and set hiring targets, among other steps. Last year’s call to action, the group’s first, featured 15 supporters running $1 trillion.
Companies worldwide are confronting the dearth of diversity in their ranks, which some investors argue affects financial results. It also underscores the promise of the Americans with Disabilities Act, which marked its 30th anniversary on Sunday. The law seeks to unlock opportunities for people with disabilities by barring discrimination because of physical or mental impairments.
“You’ve seen really a groundswell of interest,” said New York Comptroller Thomas DiNapoli, who oversees the state’s $210.5 billion public-employee retirement fund. Shareholders are seeing that “while the ADA was enacted, there’s still a lot of work to do to realize the goals of that.”
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ESG investors have historically focused on environmental issues and, in part due to the corporate blow-ups of the 2008 financial crisis, on governance. In recent years, gender and LGBTQ equality have also become salient issues.
Among investors, disability inclusion hadn’t enjoyed the same prominence. The cause got a boost following a 2018 Accenture report showing companies could access a talent pool of 10.7 million people if they provided accessible technologies or re-skilling programs, among other initiatives.
Companies that committed to the effort achieved 28% higher revenue on average and double the net income than peers over a four-year period, according to Accenture’s study.
This year, the New York pension fund and its $76 billion Massachusetts counterpart changed their proxy voting guidelines to add disability inclusion as one of the factors by which they will assess companies.
DiNapoli has sent letters to 82 firms urging them to join the Disability Equality Index, a benchmark that tracks progress toward friendlier workplaces for people with mental or physical impairments.
The push resulted in 24 corporations agreeing to participate or at least consider doing so, according to the comptroller. The 2020 edition of the index covered 247 companies, up from 48 at its inception in 2014.
More data will make it possible to continue assessing the performance of companies with welcoming policies, a key step in making disability inclusion more mainstream among investors, according to Drew Schechtman, head of ESG strategy at Voya Investment Management, which oversees $214 billion.
The decade’s top performers also outpaced broader markets over the short term.
“We need more eyes on that — more investment due diligence on that as a thesis,” Schechtman said. “To do that, you need transparency.”
COVID-19 has highlighted disparities for people with disabilities. At the height of pandemic-related job losses, 18.9% of Americans with disabilities were unemployed, compared with 14.3% for the rest of the population, according to unadjusted April data from the Bureau of Labor Statistics. The jobless rate for people with disabilities has recovered slower as states reopen.
