Disability Inclusion Core to Corporate Sustainability
Ten-year index findings highlight limited progress, building a case for adding the theme to investors’ “constellation” of ESG-related considerations.
Evidence is accumulating to show that disability inclusion is integral to companies’ sustainable long-term performance and should therefore be a priority social-related engagement theme for investors.
Global non-profit Disability:IN recently published its 2024 Disability Equality Index, highlighting improvements in almost all assessed practices. However, it also noted that further progress was needed across diversity reporting, supplier diversity spending, and boardroom inclusion.
One way to address this is through increased investor engagement on these themes.
“[Asset owners] should be asking their investment managers and investee companies what they are doing to advance disability inclusion in the workforce,” Ted Kennedy Jr, Co-chair of the Disability Equity Index and member of the American Association of People with Disabilities (AAPD), told ESG Investor. “Not only because it’s the right thing to do, but because high disability inclusion leads to greater sustainability and outperformance.”
The cohort of US companies that took part in the index survey swelled to 542 this year – seven times more than when it was first launched ten years ago. This year, 45% of them published diversity reports that included disability data – up from 24% in 2023.
The index also identified limited progress in some specific areas among US companies. Just 24% of them have set company-wide disability-focused goals in place for supplier diversity and inclusion, while only 11% have an openly disabled director on their boards, and 3% voluntarily report on board-level disability. In addition, a mere 8% included disability in their corporate governance charters that outline the nomination of new directors.
Taking it global
The index has evolved over time – from introducing segments on vendor and supplier disability diversity, to placing a stronger focus on mental health.
“We look at disability in a cross-[segment] way – both mental and physical – by considering the whole person,” said Kennedy. “Following the pandemic, there has been an increased focus on the importance of mental health, and we felt this should be reflected in the index.”
2024 also marks the first year in which the index was opened to companies outside the US – expanding to Brazil, Canada, Germany, India, Japan, the Philippines and the UK – bringing the total number of survey respondents to 753.
Out of the 34 Brazil-based companies, 91% offered short-term disability benefits to both full and part-time employees. Also out of 34 companies, 82% of Canada-based firms reported having employment and retention programmes focused on or inclusive of people with disabilities.
“Expanding the Disability Equality Index internationally reflects the tremendous demand for enhanced disability inclusion and reporting in multinational markets,” said Jill Houghton, President and CEO of Disability:IN.
The expansion of the index coincides with the introduction of new regulation that ties disability inclusion to sustainability reporting, such as the EU’s Corporate Sustainability Reporting Directive (CSRD).
To improve disability inclusion and reporting globally, Disability:IN has made a series of recommendations for companies – including encouraging employee self-identification through confidential reporting, leveraging employee resource groups (ERGs), conducting accessibility audits, and accelerating spending with disability-owned business enterprises.
Going forward, the index will further evolve, expanding its questions, scoring, methodology and metrics for more broad-based and universal use.
In addition, a key area of focus will be board-level inclusion, according to Kennedy. “I myself am a person with a disability who also sits on five company boards,” he said. “Part of Disability:IN’s work involves encouraging companies to revise their charters to include prospective directors with disabilities in the definition of board diversity – as many already do with gender, race and ethnicity.”
The Toronto Stock Exchange, for instance, currently requires listed companies to disclose whether they have persons with disabilities on the board and within senior management. Kennedy said he would like to see others – such as NASDAQ – set similar requirements.
Committing to action
According to Kennedy, a growing number of investors are committed to incorporating disability inclusion into their engagements with portfolio companies.
He spearheaded the adoption of the Joint Investor Statement on Corporate Disability Inclusion, through which investor signatories have called on portfolio companies to capitalise on disability inclusion-related opportunities.
The statement has been signed by more than 30 institutional investors managing a collective US$2.1 trillion in assets – including California State Teachers Retirement System (CalSTRS) and Trillium Asset Management.
“For every investor that has been willing to publicly sign the joint investor statement, there are two or three others that have said they support the work we’re doing, but are not ready to sign publicly,” said Kennedy, attributing this to the politicisation of social-related issues and anti-ESG sentiment in the US.
“People are hesitant now,” he added. “We definitely have more work to do, but we are still seeing more acceptance and adoption of the concept of disability inclusion in both corporate America and amongst institutional investors.”
As well as bolstering companies’ social-related performance, disability inclusion also has financial benefits. Research based on the data generated by the Disability Equality Index showed that US companies leading on disability inclusion over a five-year period achieved 1.6 times more revenue, 2.6 times more net income, and two times more economic profit than peers who aren’t as focused on the issue.
As such, people with disabilities are now included in existing investor guidance – such as the International Finance Corporation’s (IFC) Performance Standards and the International Capital Markets Association’s (ICMA) Social Bond Principles.
In June, the IFC co-published guidance for disability-lens investing alongside the Global Disability Innovation Hub (GDI Hub), which made the point that investors should pick specific stakeholder groups to focus on – such as people with disabilities in leadership positions – and identify priority sectors.
The guidance also recommended investors consider their geographical focus and legal frameworks, broaden their networks to source investments through unconventional approaches, screen prospective companies against related key performance indicators, and structure investment deals with disability themes in mind.
“We want to see disability included as part of the constellation of ESG-related issues [companies and investors] consider when thinking about factors that make for a sustainable long-term organisation,” said Kennedy.
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