Healthy minds, healthy markets: The financial case for happy employees

In today’s environment, investors are increasingly focused on intangible assets that drive long-term performance, such as human capital and intellectual property. Once viewed as a wellness initiative confined to HR, employee mental health is now recognised as a material business issue with direct implications for productivity, retention, risk exposure, and ultimately, share price.

The financial cost of overlooking employee mental health is astonishing. According to the World Health Organization (WHO), mental health illnesses cost the global economy an estimated $1 trillion annually in lost productivity¹. In the U.S. employers lose approximately $47.6 billion each year due to mental health-related absenteeism and presenteeism², while broader job stress accounts for up to $300 billion in annual costs³. In the UK, this figure stands at £51 billion annually⁴, equivalent to nearly 2% of the country’s GDP⁵.

When employees are disengaged or struggling, customer service deteriorates, deadlines are missed, and innovation falls. These outcomes can lead to slower, reduced profitability, and heighten operational risks, ultimately impacting company valuation.

For investors seeking sustainable alpha, understanding how companies manage employee satisfaction and well-being is crucial. Beyond reputational considerations, poor mental health is a material financial matter as higher employee turnover, reduced engagement, and rising healthcare costs, erode margins and compress valuation multiples.

The body of evidence that employee mental health drives a company’s financial performance is growing.

Oxford University found that happier employees are 13% more productive⁶. Gallup reports that highly engaged teams achieve 23% higher profitability⁷. And Alex Edman found that the ‘100 Best Companies to Work For in America’ delivered stock returns that beat their peers by 2.1% to 3.5% per year over a 26-year period⁸. In contrast, fear in the workplace harms retention and creativity⁹. Of course, employee happiness alone is insufficient in driving growth and innovation; a balanced approach promoting wellbeing and positive motivation with moderate challenge creates the most effective work environment¹⁰.

The mental health of a workforce is not just a signal of management quality but also operational resilience. These are key factors that influence investor confidence in a company.

While positive employee mental health can improve company performance, the reverse is also true, with some company scandals even leading to legislative change.

A wave of employee suicides at France Télécom (now Orange) in the early 2000’s was linked to humiliating management practices, leading to executive imprisonment¹¹ and 2% share price drop at the time¹². At Dentsu, the suicide of 24-year-old Matsuri Takahashi after working 100 hours overtime per month, resulted in the company president resigning and new national labour laws restricting overtime in Japan¹³. Another famous example is Foxconn employee suicides in China in 2010, which triggered intense media and public scrutiny of Foxconn’s working conditions and labour practices¹⁴. This resulted in a net loss of $218.3 millions in 2010 due to increased wage bills and welfare costs, leading to a share price derating¹⁵.

In line with our stewardship priorities, in 2025 we initiated engagements with a cross-section of portfolio companies to evaluate how they manage employee mental health, and to assess alignment between commitments and practices.

Our engagement targeted 10 companies across financial services, consumer goods, and technology sectors, across international holdings in our funds, including the Carmignac Portfolio Human Xperience fund, which focuses on investing in companies with best-in-class employee and customer satisfaction.

Our findings revealed recurring themes:

• Leadership: All companies spoke about the importance of leadership normalising discussions about mental health.
• Support: All companies has at least one form of support for employees, such as an Employee Assistance Programme (EAP).
• Gaps between policy and practice: All firms had wellness statements and initiatives but most lacked targets for implementation and improvement.
• Hybrid working: Most companies spoke about the importance of hybrid working and flexibility for employee mental health.
• Measurement challenges: Companies struggled to quantify the mental health impact on productivity or cost, and the depth of questions on the topic in employee engagement surveys varies greatly.

Roche:

• Every business site conducts psycho-social risk assessments.
• Targets set in place to continuously improve mental health support.
• Mandatory employee mental health training for managers.
• Frequent employee surveys – in addition to the annual Global Employee Opinion Survey, the company conducts shorter, more frequent surveys throughout the year to quickly gauge employee sentiment and address any emerging issues.

Mastercard:

• Medical director in the company, who reports to HR and is designed to help employees.
• Collaboration with other organisations on the best ways to integrate mental health initiatives.
• Has a specific crisis service, provided through the employee relations team.
• Dedicated quiet zones and meditation zones in the office.

As investment managers, our primary obligation is to assess risk-adjusted returns. Mental health fits within this framework both as a downside risk and an investment opportunity. The quality of a company’s approach to mental wellbeing can offer critical insights into its governance, risk culture, and operational foresight.

Investors can take several steps to evaluate mental health as part of a broader ESG integration strategy:

• Engage with companies on their mental health policies, resources, and employee feedback mechanisms during earnings calls or stewardship meetings.
• Request disclosures on metrics such as absenteeism rates, mental health-related insurance claims, turnover data, and employee engagement surveys.
• Integrate wellbeing indicators into human capital due diligence - particularly in sectors reliant on intellectual property, service delivery, or creative output.
• Support shareholder resolutions that advocate for mental health policies or broader human capital transparency.

In an investment climate increasingly shaped by long-term value creation, employee mental health is emerging as a signal of business quality. It should not be mistaken for a corporate charity initiative. It is a material factor with tangible implications for productivity, culture, and returns.

Mental wellbeing is not just good ethics, it is good economics. We believe the companies that will outperform in the coming decade will be those that treat their workforce as an asset to be nurtured, not a cost to be managed. This is particularly important as we usher in an era of humans collaborating with artificial intelligence. It is time for investors to ask hard questions, demand better data, and recognise companies that prioritise the mental health of the employees.