The last two years have been testing on both the economy and our society as we have battled through Covid, lockdowns and rising inflation. The Living Wage Foundation published data at the end of 2022 indicating that 78% of low paid workers (3.7 million workers paid below the real Living Wage), said the current cost-of-living crisis was the worst financial period they have ever faced.

A number of depressing data points are evident in their research:

• 56% of these workers said they had relied on food banks in the last 12 months with 63% of those saying their use of food banks had increased over the past year.
• 62% of low paid workers said they are worse off than they were a year ago with 64% of them citing the increased cost of living and another 18% citing inflation and / or pay not matching inflation as the reason.
• The study also found that 69% of low paid workers said the pay they receive negatively impacts both their levels of anxiety and their overall quality of life.
• When asked how much money is left over each week once essential outgoings are paid, around one quarter have no money left over and around one half have less than £10 and two thirds, less than £20. This suggests that the majority of low paid workers will be unable to keep up with the rising tide of inflation in the months ahead.

This is extremely concerning. Obviously, it is bad news for the significant number of people who are facing daily struggles because of low pay. It is also bad news for companies producing goods and services if segments of their customer base are no longer able to make purchases. Combined, it presents a grim prospect for the economy and our society.

We have always believed that long-term healthy financial markets rely on healthy communities, and we recognise that the cost-of-living crisis presents a risk to both. It is important that businesses step up to support their low-paid employees in this time of need. It is not only the right thing to do, but the smart thing to do financially, as it will build stronger companies, happier and more productive employees, and a more resilient financial system.

The role of investors 

Charity investors can play an important role in helping to address this issue by engaging with companies to understand what actions are being taken to protect the most vulnerable employees and to directly urge greater support for those most affected by the crisis.

This is why, together with Church Investors Group which represents institutional investors from Church denominations and church related charities, CCLA have written to 100 of the largest publicly listed employers in the UK, asking them about the actions they are taking to support their lowest paid employees through the cost-of-living crisis.

The companies, which include AstraZeneca, BT, HSBC, Shell and Unilever, have a combined market capitalisation of £1.7 trillion and employ around five million people, not including contractors, such as cleaners and security services, that also work on their sites.

The letter we sent expressly asks companies whether they have taken steps to support their lowest paid employees through the upcoming winter. If so, the letter goes on to ask what proportion of the workforce will be impacted by company initiatives and whether third-party contracted staff are eligible for the assistance. In the event the company has no plans to assist staff, the letter asks why they will not be acting on this issue.

Sustainable investment

CCLA and Church Investors Group see growing inequality as a systemic risk and wish to see efforts to drive inclusive growth. To support these efforts, both CCLA and Church Investors Group have plans to update our Voting Guidelines with the result that we will not vote in support of executive pay rises next year if businesses have not taken steps to shield their lowest paid workers from the impacts of the rising cost of living.

Sustainable investment should be about going beyond the portfolio to instigate and drive positive change in the real world. There are tangible actions that we in sustainable investment can take, right now, to improve people’s lives.

CCLA Investment Management Limited (Registered in England & Wales under number 2183088) and CCLA Fund Managers Limited (Registered in England & Wales under number 8735639) are authorised and regulated by the Financial Conduct Authority (FCA). Their registered address is One Angel Lane, London, EC4R 3AB. www.ccla.co.uk