ESG Investing

Mental Health and Employee Welfare: An Emerging ESG Concern

The stressors of 2020 took an incredible toll on many Americans’ mental health.

For much of the fourth quarter of 2020, more than 40% of those polled by the Centers for Disease Control and Prevention (CDC) acknowledged feeling symptoms of anxiety or depression. By comparison, only 11% experienced similar symptoms in the first half of 2019, as the National Center for Health Statistics (NCHS) reported.

From the coronavirus pandemic’s onset through public turmoil over social injustices, a divisive national election, and the winter resurgence of COVID-19 cases, mental health leapfrogged other employee welfare issues in 2020. Widespread shutdowns and social isolation only exacerbated the emotional challenges.

Amid the burgeoning behavioral health crisis, environmental, social, and governance (ESG) investors have begun carefully examining employers’ efforts to address the situation. As part of a broader focus on the social dimension of ESG, fresh interest in care for employees and other stakeholders has risen to levels previously limited to environmental and governance issues.

Long-Standing Challenges to Employee Welfare

Even before the pandemic, the National Institute of Mental Health found that more than 20% of adults in the United States reported experiencing at least one mental health issue. Of those, only about 45% received care.

The stigma surrounding mental health has historically kept it out of the spotlight in the workplace. Yet poor mental health can disrupt productivity as well as harm performance, engagement, and communications, according to the CDC. As more jobs either shifted to remote work or became high-risk in-person propositions in 2020, multiple surveys have found that three-quarters of US workers were experiencing burnout.

That said, employers were already becoming more aware of the value of addressing mental and behavioral health before COVID-19 struck. In its 2019 employer health benefits survey, Willis Towers Watson reported that 66% of respondents named mental and behavioral health as a leading focus between 2020 and 2023.

Amid the burgeoning behavioral health crisis, ESG investors have begun examining employers’ efforts to address mental health in the workplace.

Employee Mental Health Reaches Investors’ Radar

Just as employers were already beginning to consider mental health’s role in employee welfare, one December 2020 article from the Harvard Law School Forum on Corporate Governance noted that the subject was also gaining traction in the field of ESG investing.
The article argued that more immediately, the ongoing effects of COVID-19 highlighted the importance of mental health to institutional investors. In fact, a poll of signatories to the Principles for Responsible Investment listed mental health as one of the top four social issue priorities going forward.

Separately, the Sustainability Accounting Standards Board made mental health, well-being, and health-related benefits a key focus in the proposed revamp of its human capital standards unveiled in December 2020. From an ESG investing perspective, the corporate world’s emphasis on mental wellness has also fueled new innovation, from smartphone apps to telehealth solutions.

Despite the ongoing mental anguish that the pandemic has inflicted and exacerbated, the growing awareness of mental health issues among corporate leaders and investors could ultimately prove to be a silver lining.


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