Workplace health and Safety
Pax World believes a company’s commitment to workplace and employee safety is a key component of its overall sustainability profile. The costs of workplace accidents can grow quickly when factoring in workers’ compensation payments, legal expenses associated with litigation, regulatory penalties and compliance costs. Liberty Mutual Group’s 2007 Workplace Safety Index estimated that direct U.S. workers’ compensation costs for the most disabling workplace injuries and illnesses in 2005 were $48.3 billion.1 However, the indirect impacts associated with workplace accidents can be just as costly and include diminished productivity, decreased worker morale and damage to a company’s reputation or brand image. Given that many of these costs can be avoided through the effective implementation of strong safety programs, Pax believes that companies that do so are generally better managed. In fact, Professional Safety reported Liberty Mutual Group’s Executive Survey of Workplace Safety” found 95 percent of business executives reported workplace safety had a positive impact on financial performance. Of that group, 61 percent believed they received a return on investment of three dollars or more for every one dollar invested in workplace safety programs.2
For companies operating in particularly high risk industries such as energy, utilities, materials and industrials, Pax considers workplace safety to be a key issue. When evaluating a company’s workplace safety profile, Pax generally favors companies that disclose comprehensive safety policies, management systems and information regarding the implementation of such programs. In addition, Pax favors companies that disclose standard safety statistics such as lost-time rate, accident severity rate and fatalities, in addition to setting measurable safety performance targets. For companies based in the United States, a company’s record with the Occupational Safety and Health Administration (OSHA) is examined in terms of the frequency of documented safety violations, the type of safety violation and the size of associated penalties relative to the number of operating facilities in the United States and the size of their U.S. workforce. Pax also examines forward-looking indicators such as companies’ safety certifications, including OHSAS 18000, an international occupational health and safety management system, and OSHA’s Voluntary Protection Program (VPP), a program that recognizes a facility for excellence in safety and health management. For companies operating in other countries, Pax uses comparable information from in-country regulatory bodies and voluntary organizations when it is available.
Pax recognizes that no company is perfect and that workplace accidents do occur. In those cases, Pax expects companies to respond appropriately to accidents and to exhibit transparency regarding corrective actions taken to avoid recurrences. Pax will generally avoid investing in companies that have a history of significant safety problems and no published safety policy, and may also decline to invest in companies whose policies are ineffective, or if they have failed to take appropriate steps to mitigate workplace safety risks.
The issues highlighted above are illustrative and do not necessarily reflect the full range of workplace health and safety issues Pax World may consider in analyzing a particular security for investment.
1Liberty Mutual Research Institute for Safety, “Workplace Safety Index: Looking Back: Origins of a National Metric,” From Research to Reality, Winter 2008, Vol. 11, No. 1.
2“Safety Yields High Return, Liberty Mutual Survey Finds,” Professional Safety. Nov2001, Vol. 46 Issue 11, p12
The Pax World Funds’ sustainable investing policies may inhibit the Funds’ ability to participate in certain attractive investment opportunities that otherwise would be consistent with its investment objectives and other principal investment strategies.