Stock market performance linked to health, safety programs: Study

Stock market performance linked to health, safety programs: Study
A study using investment simulations for 17 publicly held multinational companies with strong employee health or safety programs suggests employers that invest significantly in health and safety programming can outperform other companies in the marketplace.
Lead author Raymond Fabius, co-founder of HealthNEXT, and colleagues studied the stock market performance of companies that had applied for or received the American College of Occupational and Environmental Medicine's (ACOEM’s) Corporate Health Achievement Award (CHAA), which annually recognizes the healthiest and safest companies in North America. To be considered for the CHAA, companies must be engaged in measurable efforts to reduce health and safety risks among their employees.

The authors tracked the stock market performance of 17 CHAA applicants or recipients with proven health and/or safety programs using six investment modelling scenarios. Companies studied had achieved high CHAA scores in either health or safety, or in both categories. Investment scenarios were created and analyzed for the period spanning 2001-14, using a hypothetical initial investment of US$10,000.

Over this 13-year period, the hypothetical investment returns for CHAA companies were significantly higher than average S&P 500 returns — as much as triple in some of the scenarios. In the best-performing scenario, CHAA companies achieved a 333 per cent return, compared to an S&P return of 105 per cent during the same period. In the lowest-performing scenario, CHAA companies achieved a 204 per cent return, compared to an S&P return of 105 per cent during the same period.

The authors concluded that companies that score high in CHAA health and/or safety categories are associated with superior marketplace performance.

“The results provide evidence that the stock appreciation of companies that are recognized for excellence in health and wellness, safety or both, out-performs that of other companies that have not been so recognized,” the authors wrote, adding that the results are “consistent with — and augment — the growing body of work that is associating excellence in health, wellness and safety with superior financial performance in the marketplace.”

The authors of the CHAA study, titled Tracking the Market Performance of Companies That Integrate a Culture of Health and Safety: An Assessment of Corporate Health Achievement Award Applicants, acknowledge that the study presents correlation but does not imply causation, but stress the evidence linking business value with health and safety programming continues to grow and is useful to investors.

“This information should become increasingly important to corporate leadership and the investment community,” they wrote. “While there is ample evidence that a healthy and safe workforce can tangibly contribute to the bottom line of most self-insured mid-sized and large employers, demonstrated causality may not be necessary to inform investors.”

The authors also note that the study’s results provide support for the establishment of a uniform health and safety index for investors. The so-called Integrated Health and Safety Index (IHS Index) would be modelled on the well-known Dow Jones Sustainability Index (DJSI) and would give investors a consistent set of health and safety metrics to use when assessing the comprehensive value of companies.

“Just as investors use the DJSI to distinguish organizations that operate in an ethical manner with an emphasis on long term performance, they could use the IHS Index to assess an employer’s commitment to workforce health and safety as they build portfolios of sustainable companies,” the authors wrote.