Tech Sector Challenged on Consumer Wellbeing, Mental Health

Investor initiative aims to establish qualitative targets for addressing mental health-related risks in tech industry’s business models. 

A group of institutional investors managing over US$2 trillion in assets has identified mental health as a systemic and financially material risk, unveiling a collaborative engagement initiative targeting the tech sector.  

“The growing importance of mental health – with issues like addiction and other negative impacts on end-users’ mental wellbeing on the rise – is becoming increasingly material to investors,” said Theó Kotula, ESG Analyst at AXA Investment Managers (AXA IM) and Co-Chair of the coalition.  

“It’s not yet been addressed by the investor community,” he told ESG Investor, noting that there has instead been increased investor focus on other related themes: digital rights, data privacy, and the responsible use of artificial intelligence.   

The initiative will be starting a dialogue with companies to establish whether, and to what extent, they have integrated considerations of mental health-related risks into their business models, said Anne-Claire Impériale, Head of ESG Research at Co-Chair Sycomore Asset Management (Sycomore AM). 

“Do they need to rethink their products and services?” Impériale posited.  

The group will be targeting companies in social media, gaming, software, hardware, telecoms and more, including Alphabet, Netflix, Meta and Zoom. 

Companies will be asked to set out measures to mitigate risks of addiction on end consumers’ mental health and wellbeing, establish a high-level commitment to keep children safe online, develop a mechanism to report harmful online content and cooperate with the authorities to report abuse, and support educational initiatives for online safety, mental health and wellbeing.  

These commitments would need to be supported by “comprehensive” qualitative goals and targets that “encompass the entire business model” to allow shareholders to monitor improvements and progress made, said Kotula.  

Both Kotula and Impériale acknowledged that the tech sector has historically been challenging to engage with on ESG-related issues, but noted that increasing exposure to reputational and regulatory risks should serve as further incentive for companies to account for mental health and wellbeing going forward.  

“The more these companies take on the problem, the better prepared they will be,” said Impériale. 

“Systemic sustainability challenge” 

Companies also need to do more to address the mental health of their workforces, according to James Corah, Head of Sustainability at CCLA.  

The estimated total annual costs of employee absenteeism, presenteeism and labour turnover at UK-based companies increased by 25% since 2019 to an estimated annual total of £53-£56 billion (US$69-US$73 billion) in 2021, according to a 2022 report by Deloitte, with poor mental health found to be a key contributor to this escalation.   

Further, the Big Four accountancy firm calculated that employers see an average return of £5.30 for every £1 invested in staff mental health. 

“Mental health is a genuinely systemic sustainability challenge,” said Corah.  

The asset manager’s 2022 Corporate Mental Health Benchmark Global 100, which analyses current practices taken by global companies to support employee mental health, highlighted that only 15% of assessed companies had published mental health objectives, and 19% had assigned day-to-day operational responsibility for implementing their mental health policies.  

CCLA also runs a UK-focused version of the benchmark.  

“I welcome the consumer-focused initiative [led by AXA IM and Sycomore AM],” said Corah, adding that it is “crucial” progress is made with the tech sector before expanding to others.  

Jan Rydzak, Digital Transformation Lead at the World Benchmarking Alliance (WBA), said it’s “heartening to see investors rally around this topic” and that the coalition is “timely and very prescient”. 

“Tech companies aren’t free to opt out of protecting the wellbeing of their users, especially when those users are already at risk of being exploited and marginalised offline,” Rydzak said. 

Tech companies have “a long way to go”, he added. 

WBA’s latest Digital Inclusion Benchmark found that less than 14% of tech companies are delivering on digital inclusion, with only 27 out of 200 scoring at least 50% across key criteria, such as diversity. Further, only 14 out of 200 have publicly committed to keeping children safe online.  

“The use of automated tools to detect and limit abusive behaviour is still poorly understood, as is their effectiveness,” said Rydzak. “Some industry titans still don’t report on how they combat abuse on their platforms or have foregone regular reporting altogether.” 

AXA IM and Sycomore AM’s 27-strong investor engagement coalition is in the process of sending out letters to target companies, outlining the intentions of the initiative and their expectations.  

Investor members aim to have their first related engagements with each company by September, when they will gather to collectively review the findings thus far and outline next steps.  

“The door remains open to other investors who may like to join,” said Kotula.  

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