The economic case for caring is a compelling one. There is plenty of evidence to suggest that businesses with a cohesive culture and satisfied employees outperform those that do not, and that company performance and individual wellbeing are inextricably linked1 .
This thesis has been borne out by the receptive response we have had from companies to our engagement on the issue.
Many companies asserted that they viewed their employees as their most valuable asset – and yet reporting on mental health can be limited and tricky to validate.
Since engagement, a number of investee companies have expanded their disclosures with one noting: “We recognise that mental health is a critical factor to overall employee wellbeing and have dedicated resources accordingly.”
As another company in our portfolio explained, its approach to recruitment and managing its workforce “may cost more” but they believe it has significant payback “because everyone is pulling in the same direction”. We agree. There are several reasons why employers should proactively invest in their employees’ mental health:
- Reduced productivity: An estimated 12 billion productive working days are lost globally every year to depression and anxiety alone, at a cost of nearly US$1tn2.
- Enhanced retention: In the UK, employees with poor mental health are almost twice as likely to leave work following the onset of illness than those who report good mental health3.
- Better return on investment in human capital: For every US$1 invested in scaled-up treatment for depression and anxiety, there is a US$5 return in better health and productivity4.
Benchmarking success: seven metrics to watch
At the beginning of 2024, having reviewed the literature and related initiatives, we assembled seven wellbeing indicators and developed our own benchmark against which we assessed portfolio companies. We awarded points based on a company’s ability to demonstrate meaningful work-related mental health initiatives.
We awarded a point for every indicator fulfilled and a half point if the indicator was partially fulfilled. While the maximum score a company could achieve was seven, the best score achieved was six points, with the lowest scoring 0.5.
Having appraised each company and established a baseline score, we wrote to investee company CEOs to lay out the case for supporting employee wellbeing and outlined those practices which we considered to be important. We received an 80% response rate and engaged to and out more.
Over the year, we monitored and adjusted company scores based on improved disclosures, adding insights gleaned from interactions factoring in new initiatives.
Subsequent to our engagement, the average portfolio company’s mental health score improved one full point5. In addition, the number of high-performing companies grew significantly while the number of low-scoring companies halved.
What have we learned
We were impressed by the number of companies which responded positively and with whom we subsequently engaged directly with the CEO on this agenda. At many companies, we met with Chief Human Resources Officers (CHRO) – a channel of engagement we have increasingly found of value in recent years. The willingness to engage on topics that are difficult to measure was welcome and in most cases informed our view on corporate culture more broadly.
Visible leadership was the indicator that saw the greatest uplift in scoring over the year. During the Covid-19 pandemic many companies introduced initiatives to support employees’ mental health. A few years on, reported mental health issues remain prevalent. In 2021 and 2022 almost a quarter of adults in the US reportedly experienced symptoms of mental illness – equivalent to nearly 60 million Americans and more than 5% of US adults reported seriously contemplating suicide6. During our engagements, we encouraged company management to prioritise this issue.
A mental health policy underpins a sustained commitment. The need to adopt a more explicit mental health policy – giving equivalency to mental health and physical health – was well received by many senior managers, even if adoption has been understandably slower. Fundamentally, companies need to ‘walk the talk’ and this requires an overarching strategy with adequate and sustained investment in mental health resources. Many companies have some way to go to embed caring cultures and gather sufficient data to support evidence-led initiatives.
Access to Employee Assistance Programmes (EAPs) is the minimum requirement. For many, cost remains a significant barrier to accessing mental health care7 . With approximately three quarters of companies providing an EAP benefit – typically offering free short-term counselling and advice, the provision of such benefits should be considered the bare minimum.
All too often, the issue of mental health is ‘individualised’ – ignoring the role that work (and the workplace) can plan in incubating stress, burnout and anxiety.
We also need to look at the surrounding corporate culture and the extent to which companies encourage employees to use these services when the need arrives.
During our investigation into mental health and the workplace, we noted how popular approaches – such as the providing wellbeing apps, hosting internal webinars and celebrating World Mental Health Day – contrast with a 2024 study8, which suggested such initiatives have little or no long-term impact on employee wellbeing (however, this study does not include EAPs).
All too often, the issue of mental health is ‘individualised’ – ignoring the role that work (and the workplace) can plan in incubating stress, burnout and anxiety.
Within our portfolio companies, mental health first-aider training increased by approximately 60% during the year. This development was encouraging to see, although, in practice, many companies are providing such training on a sporadic basis without a strategy or sustained commitment to underpin it.
The involvement of line managers – who manage people – is crucial to ensure that companies maintain a culture of prioritising employee wellbeing. It is vital that line managers are able to identify issues and respond in a sensitive and supportive manner.
An ongoing mission
We have continued to have various dialogues – both positive and difficult – during 2025, while also evolving our expectations (to accommodate the differing perceptions of mental health across various geographies).
More pertinently, we will seek to ensure that companies appreciate the business risks that worker mental health represents. We believe the issue should be given equivalent importance to the physical safety of employees.
Our goal is to increase the number of companies delivering line manager training on mental health over the course of this year, and for those firms already delivering such training, to encourage them to monitor and measure the outcomes of their wellbeing initiatives.
Critically, we want to see companies commit to creating and sustaining corporate cultures that enable their employees to thrive – which is in the interests of their shareholders and wider society.
*Formerly SDG Engagement Equity
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Please note the Federated Hermes Global SMID Equity Engagement Fund forms part of the SDG Engagement Equity composite Strategy. The SDG Engagement Equity Fund changed its name to the Global SMID Equity Engagement Fund on 24 April 2025.
1 Bellet et al, Centre for Economic Performance, Does Employee Happiness Have an Impact on Productivity, 2020; Edmans, A, The link between job satisfaction and ¬rm value, 2012
2 The Lancet Global H Mental health matters, also cited here in a journal article about burnout in Singapore.
3 Lancaster University, Work Foundation, December 2024, Stemming the tide: Healthier jobs to tackle economic inactivity.
4 Deloitte, 2024, Mental health ad employers report.
5 Average mean score – 2023 score 1.79, 2024 score 3.05. Of the 29 companies included in the engagement, the average improvement was approx. 1.25 points. Also note, we expect no company to score full points unless they are exceptional.
6 The State of Mental Health in America, 2024, Mental Health America
7 The State of Mental Health in America: https://mhanational.org/issues/state-mental-health-america.
8 Fleming, W. Employee well-being outcomes from individual-level mental health interventions. Industrial Relations Journal, 2024
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