Human Capital Index: How are companies performing?

The JPX/S&P CAPEX & Human Capital Index measures the performance of Japanese companies proactively investing in physical and human capital. The index, which will be rebalanced Sept. 19, focuses on three social criteria — labor practices, human capital management and human rights. These topics reflect companies’ ethical commitments and impact financial performance, reputation and operational resilience. Organizations that promote fair working conditions, invest in talent development and respect human rights across their value chains are better positioned to attract investment, manage risks and generate long-term sustainable value.

Within our ESG Scores and Raw Data, underpinned by the S&P Global Corporate Sustainability Assessment (CSA), we assess how companies score on labor practices, human capital management and human rights.

The CSA is an annual evaluation of sustainability practices covering about 14,000 companies worldwide. In this review, we analyze the scores of 12,838 public companies on these three social criteria in 2024 across 62 industries.

Figure 1 shows consistent improvement across all selected criteria over the last three years, with labor practices scoring highest on average. This is closely followed by human capital management, while human rights scored lowest. Despite this, the human rights score improved the most, increasing 54% from 2022 to 2024, compared with a 23% climb for the other two criteria. The overall CSA score increased 22%, similar to the other two criteria, suggesting the human rights criterion’s greater jump in score may be an anomaly.

Human rights can be considered a less developed topic for corporates, particularly at the current depth of assessment. Expectations around human rights commitments have evolved significantly since the criterion was introduced to the CSA in 2015. Initially, reporting focused on whether companies had made any commitments to human rights. The standard has since become more stringent, requiring companies to establish commitments and programs as well as actively track and report relevant metrics.

Human capital management and labor practices, on the other hand, were already assessed with more depth and higher expectations at that time. As such, reporting on human rights is still catching up. The more pronounced rise in the human rights score may be attributed to this factor, along with increasing regulations and frameworks in recent years, which have enabled more concrete improvement.

Focusing on 2024 only, figure 2 shows that Latin America led in performance for all three criteria. When comparing these averages, note the variation in sample sizes: Latin America had one of the highest averages for all three topics, but its sample size was only 501 companies; Asia-Pacific had a relatively low average, yet its sample size was 6,930 companies.

Labor practices consistently emerged as the highest-scoring criterion, with human capital management second and human rights third, across all regions except Asia-Pacific. In that region, human capital management was the highest-scoring criterion. The relatively low scores for labor practices in Asia-Pacific may stem from fewer regulatory frameworks and less market or investor pressure. Furthermore, Asia-Pacific’s large sample size and diverse governance and market conditions contribute to the wide performance variations for this topic. These factors shape the region’s distinctive scoring pattern and highlight the complexities and challenges in aligning labor practices across such a vast and varied landscape.

Across sectors, utilities had the highest average score for all three criteria, while healthcare had the lowest for human capital management and human rights, as shown in figure 3. These results may be attributed to employee retention and well-being challenges in healthcare over the last few years. The sector is also highly knowledge-intensive, which affects recruitment and turnover costs. Industries within healthcare vary significantly, from healthcare services to pharmaceuticals, which may lead to considerable differences in approaches for each of the three topics.

The order of highest- to lowest-scoring criteria is nearly the same for all sectors, indicating that companies across the board generally have more advanced policies, programs and strategies for labor practices and human capital management than for human rights. Only the financial and consumer staples sectors had human capital management scoring higher than labor practices. It is unsurprising that human capital management is the financial sector’s best score, as talent attraction, employee retention and employee support programs are highly material to the sector. More information on industry materiality can be found here.

Labor practices, human capital development and human rights are important to many companies, and the Human Capital Index provides detailed information on top performers for these criteria. Growing investor demand for transparency on these and other topics is driving increased disclosure regulations, while globalization, remote work and technologies such as AI are making human capital a key focus for many companies. We expect companies will continue improving their standards based on these key social criteria due to their high materiality for most sectors.