Celebrating 70 years of human rights – a role to play by investors

This blog originally appeared on GES International’s website and has been republished following Sustainaltyics’ acquisition of the company on 9 January 2019. See the press release for more information.

Today, exactly 70 years ago, the United Nations General Assembly adopted the Universal Declaration of Human Rights – a unique milestone in human history, defining our universal rights for the first time. This is also why, every year, on 10 December, we celebrate Human Rights Day.

So what does this have to do with investors?

There is a movement concerning corporate respect of human rights among responsible investors. We have seen a growing number of investor initiatives such as the Corporate Human Rights Benchmark, the Interfaith Center on Corporate Responsibility’s Investor Alliance for Human Rights and KnowTheChain benchmarks on forced labour in the apparel and footwear, food and beverage and ICT sectors.

Strengthened legislation in relation to the subject has also been noted, not the least of which are the California Transparency in Supply Chains Act and the UK Modern Slavery Act. A couple of weeks ago, Australia also joined such efforts when its parliament passed the Modern Slavery Bill. It will soon become law with an anticipated effective date of 1 January 2019. The new law will require certain large entities with a turnover of USD 72 million or more to publish annual statements outlining the risks of modern slavery in their operations and supply chains and actions taken to address those risks. It is easy to understand that companies prepared to manage such new legislative demands have a competitive advantage over those peers who are not.

Several of the Sustainable Development Goals advocate for such issues as poverty reduction, reduced inequalities, decent work, etc. and are directly linked to the respect and advancement of human rights. A new UN Global Compact report calls on institutional investors to ‘increase their allocation of capital towards the SDGs, and to drive the demand for a diverse set of SDG investments ranging from sovereign bonds to corporate bonds and equity.’ At GES, we can also observe and assist an increasing number of investors taking social issues into account in their investment decisions and expect companies to operate according to the UN Guiding Principles on Business and Human Rights (UNGPs).

If you, as an investor, would like to approach the fairly broad subject of human rights – where do you start? How does an investor control its portfolio’s impact on human rights and work towards becoming aligned with the UNGPs? If an investor is to engage companies on human rights – which companies should be prioritised and what issues are most crucial to be addressed?

Knowing that many investors struggle with such questions, GES has recently launched a tool for investors to get an overview and help prioritise human rights issues in its portfolios for engagement.

At GES, we have been working for a long time with a variety of human rights issues, across various sectors and geographies. As an example, through our Business Conduct Engagement, we annually conduct dialogues and engages with almost 200 companies on human rights related topics. We have built a unique database covering some of the most severe corporate human rights controversies over the last decade. Based on ongoing controversies, GES has now developed a tool for investors to identify human rights salience and preparedness in their investment portfolios. 73 companies with links to ongoing, severe human rights violations have been assessed by:

a) evaluating the salience of the human rights incident(s) linked to the company in question;

b) evaluating the company’s preparedness to align its practices with the UNGPs. This is based on the three key parts in the UNGPs regarding companies’ responsibility to respect human rights, i.e. having in place a human rights policy, a human rights due diligence process and a procedure to remediate adverse human rights impacts linked to the company.

The assessments provide investors with a tool to:

• understand human rights risks and adverse impacts in their portfolios;
• select companies to prioritise engagement efforts on; and
• inform the engagement process where improvements are most needed.

It is our hope that our assessments become a tool for investors to become better informed of portfolio human rights risks and encourage additional engagement efforts to close major gaps in corporate respect for human rights. For human rights to prosper in the next 70 years and beyond, both companies and investors have critical roles to play. In most cases, when investors engage with companies, constructive dialogues lead to constructive solutions. This is what the world needs when facing several human rights challenges.