Introducing FREEIN: Investing for a Fairer Future (2/3)
This post is part of a three-part series about The Decarceration Index (FREEIN), the first index to track the performance of companies engaging in fair chance hiring practices as well as managing their exposure to prison risk. To be notified about future posts, follow our LinkedIn.
In our previous post, we introduced FREEIN, an innovative index that tracks companies committed to fair chance hiring practices while reducing their prison risk exposure. Now, let's dive deeper into the business case for this approach and explore the methodology behind FREEIN, highlighting how investing in these companies can drive both financial returns and social change.
Labor Market Dynamics
As of April 2024, the U.S. labor market faces a significant gap: there are 8.5 million open jobs but only 6.5 million unemployed workers. This shortage is a major constraint on productivity and growth across industries. At the same time, approximately 70 million Americans—1 in 3 adults—have a criminal record, representing a large, often-overlooked workforce. According to FreeCap’s research, less than 40% of companies are willing to hire someone with a criminal record, despite evidence showing that these individuals often exhibit higher levels of productivity, dependability, and loyalty than their peers. This bias results in millions being systematically excluded from the workforce, exacerbating labor shortages.
The FREEIN Investment Thesis
For investors, this presents a unique opportunity. Companies that adopt fair chance hiring practices tap into a motivated, skilled workforce, helping them address labor shortages while gaining reputational benefits. Conversely, companies linked to prison labor or profiteering often suffer lasting damage to their brand. As labor shortages continue to affect a wide range of industries, companies that refuse to adapt are at risk of being left behind in the competitive talent market. By investing in companies willing to break down employment barriers, investors can align their portfolios with both social impact and financial returns.
FREEIN’s Methodology
FREEIN makes it easy for investors to track the performance of companies leading in fair chance hiring while mitigating their prison risk exposure. FREEIN starts by evaluating the 500 largest US-listed companies with FreeCap's criminal justice lens screens. The list is narrowed to about 100 companies by selecting those with above average fair chance hiring practices and prison risk mitigation scores using FreeCap’s proprietary ratings methodology to create a group of leaders that are contributing to solutions to mass incarceration. Finally, the index utilizes a free float market capitalization, ensuring both financial performance and scalable social impact.
Conclusion
FREEIN’s investment approach recognizes that fair chance hiring is not just about doing the right thing—it’s also a smart business move. Companies embracing these practices gain access to untapped talent, improve their brand image, and enhance long-term profitability. As labor shortages persist, businesses that hire from this overlooked population will be better positioned for success in an increasingly competitive and socially conscious market.
Interested in learning more? Contact us and stay tuned for our next blog post that will dive into the investment thesis and methodology behind FREEIN.
Sources:
U.S. Bureau of Labor Statistics: Number of unemployed people per job opening
FreeCap Financial: 2023 Criminal Justice Report
Northstar Asset Management: The Investor Case for Fair Chance Employment
