Within ESG frameworks, environmental and governance issues have traditionally received more focus than the social dimension. While climate targets and board diversity are now well-established in most ESG strategies, human capital aspects, including employee wellbeing, skills, engagement, and sentiment, have often remained underexplored.
This imbalance stems largely from limited data availability, inconsistent disclosures, and a lack of standardization. Yet, the financial case is becoming more evident: workforce-related factors are not just ethical or reputational concerns; they are financial variables that affect company performance and long-term value.
Human capital drives business outcomes
Recent studies have taken a data-first approach to quantify the role of human capital in financial performance. By analyzing global data across industries and regions, researchers are providing statistical evidence that links workforce metrics, such as turnover and retention, to key business outcomes, including profitability, enterprise value, and growth.
1. Investment in training supports higher productivity
The analysis shows that companies that invest more in employee training and maintain lower turnover rates demonstrate significantly higher labor productivity. Training initiatives, when sustained over time, have a measurable impact on performance through increased revenue per employee.
2. Low turnover and high training lead to greater efficiency
While reducing employee turnover may bring short-term savings, data reveals that long-term efficiency is best achieved when companies combine low turnover with increased training efforts. These organizations outperform their peers in operational output and overall workforce efficiency.
3. Employee sentiment correlates with future revenue growth
The report also identifies a strong relationship between internal sentiment and business performance. High levels of optimism about a company’s outlook and work/life balance are strongly associated with better revenue growth. Workforce morale emerges as a predictive signal of future results.
4. Poor sentiment impacts retention and stability
Voluntary turnover is often driven by weak sentiment related to compensation, leadership trust, and work culture. These findings highlight that employee engagement and organizational culture are central to talent retention and business continuity.
5. Human capital is material across all sectors
Contrary to earlier ESG frameworks, which limited the financial relevance of human capital to specific industries, the latest findings demonstrate its materiality even in sectors like banking and insurance. This broadens the scope of where social performance needs to be actively measured and managed.
Denominator: translating social data into investment insight
Although awareness of human capital’s financial importance is growing, many investors still face challenges when it comes to implementation. The lack of high-quality, comparable data remains a barrier to fully integrating social metrics into ESG analysis.
Denominator addresses this gap by providing the most comprehensive dataset focused on social performance. Our metrics span workforce composition, diversity, turnover, human rights, labor rights, and health and safety, offering a consistent view across regions, sectors, and company sizes.
Our data enables institutional investors to incorporate human capital considerations into both ESG and fundamental investment processes. What was once considered qualitative can now be measured and used to inform strategic decision-making.
These findings confirm that human capital is not a secondary consideration. It is a measurable, financially relevant element of corporate performance.
The future of sustainable investing is not just greener. It’s more human.
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