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What is workers’ capital?

Workers’ capital refers to the assets accumulated in collectively funded schemes in order to provide workers with financial security in their retirement.

How much money are we talking about?

According to the Tower Watson Global Pension Asset Study (2014), workers’ retirement savings and pension funds total more than USD 30 trillion globally.

It has been estimated that pension fund holdings account for about one-third of the world’s total share capital – and significantly more in some countries such as the United Kingdom and the United States.

Why does this matter for workers?

The concentrated nature of share ownership on the world’s capital markets means that large institutional investors – insurance companies, mutual funds, and pension funds – own many of the world’s listed companies.

Around the world, a significant portion of these shareholdings is held in workers’ retirement savings, pension funds, and other investment vehicles, otherwise known as workers’ capital. As beneficial owners of these deferred wages, workers are the indirect owners of a substantial portion of the world’s equities, though pension asset allocation patterns vary between countries.

As indirect owners, workers in particular have the right to know more about how their money is invested and to demand better governance, transparency and sustainability for these investments.

To find out more: Watch “Its Our Money” from UNISON’s Capital Stewardship Program.

The promise of workers’ capital

The investment of worker retirement savings is meant to provide long-term financial returns to pension fund beneficiaries. A proactive approach to managing workers’ capital - sometimes called capital stewardship - can help companies build long term value while avoiding short term excesses. The key idea is to influence corporate behaviour by leveraging worker capital as indirect owners of business through their shareholdings.

Challenges for workers’ capital

Worker retirement savings and pension funds own a large portion of the capital markets. Assets held in trust in workers’ retirement funds are increasingly global, and often invested in transnational corporations. 

Many such companies benefit from, or are otherwise involved in human rights and international labour standards violations, the privatisation of public sector jobs or polluting the environment. With companies typically focused on short term returns, long-term social and environmental challenges go unaddressed, which may eventually undermine the ability of pension plans to deliver the future benefits they promise.

How can owners of workers’ capital influence big companies?

A wide and varied “toolbox” is available to advocates for the responsible investment of workers capital.

  • Positive actions can range from coordinated shareholder activism and proxy voting campaigns to international engagement with companies in which retirement funds hold stock as well as investment managers.
  • Alternately, “negative” screening is available to weed out companies pursuing undesirable practices (social, environmental, lacking workers’ rights, etc.) from pension fund and retirement investments.
  • With effective organization and coordination, worker capital can help address persistent corporate or market failings, resulting in improved corporate governance.
  • Capital can be steered to needy areas of the economy that traditional institutional investment has failed to serve properly, which is known as economically targeted investment.
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