Investing through a refugee lens is in very early stages, but field-building and investor stewardship is happening in pockets.
With the Intergovernmental Panel on Climate Change (IPCC) warning this week of the growing risk of significant near-term climate change impacts unless rapid changes are made, global displacement from extreme weather events looks set to grow.
Countries are already dealing with massive movement of peoples due to war and conflict, and now increasingly climate disasters from outside their borders, and within.
But despite the clear and present danger for peoples in many regions as climate change intensifies, there is currently no international legal framework that specifically recognises the rights of climate refugees.
The United Nations Framework Convention on Climate Change (UNFCCC) recognises the importance of addressing the issue of climate-induced displacement and migration through the Warsaw International Mechanism for Loss and Damage (WIM) which has established a Taskforce on Displacement. However, the WIM does not address the rights of climate refugees – or even define who will count as one.
So-called ‘climate migrants’ do have some basic rights under existing international human rights law, but advocates say they lack vital protection afforded to other groups, such as refugees. Governments are responsible for any internal climate migrants, but there are few instances in which governments are obligated to protect those crossing borders.
With the lacklustre state of international frameworks for people displaced by climate change, it’s not surprising that there’s hardly any mainstream focus or understanding of the issue. But there are a handful of organisations in the finance sector starting to ‘field build’, working on research, data and indices on refugees, with attention growing on those displaced by the climate crisis too.
Investor stewardship on migrant rights
“There will be over a billion climate refugees or climate displaced people by 2050, according to the Institute for Economics and Peace,” says Barbara Pomfret, a migration and investment researcher who has left a ten-year career in finance to pursue her personal interest in refugee protection and forced migration.
She was speaking on a webinar organised late last year by NGO Preventable Surprises on climate action and investor stewardship on migrant rights. Pomfret, who has held roles at Bloomberg and Allianz Global Investors, notes that at COP27 forced migration wasn’t a topic, despite emerging conversations on its role in climate adaptation to tackle labour shortages in developed countries.
“We saw lots of conversations about what loss and damage look likes. We heard people talk about the need to allocate resources to the countries where the climate impacts are already being felt and will continue to be felt the strongest, but what about the displaced populations and the opportunity to offer them safe passage and use migration as a tool to adapt in the environments that need it?”
Investors speaking on the webinar pointed to a lack of internal resource and will, with challenges sourcing data and information also impeding attention.
Marcela Pinilla, Director, Sustainable Investing, Zevin Asset Management, says: “We are aware of the movement of people, but we also don’t fully understand the impacts that the movement of people are having.”
The frameworks Zevin uses to assess the social and environmental impacts and opportunities of its portfolio don’t easily lend itself to refugees, Pinella acknowledges. But there are pockets where synergies can be identified, such as its assessment of mismanagement of human capital and whether companies are treating refugees they employ fairly for example. Or its racial equity lens, where it invests with mind to the legacy of colonialism and its effects of underinvesting and over extraction of resources in the Global South.
Performance and pressure
The data situation is starting to improve courtesy of Refugee Integration Insight (RII) which is helping investors such as Zevin to understand how portfolio companies are engaging with and treating refugee communities.
Sindhu Janakiram, Co-founder and CEO of RII, says it tracks data to identify the top performing companies on refugee integration. It includes tracking company refugee programmes such as support for entrepreneurship or specialised training. It also tries to identify the risk of human rights abuses of refugees in supply chains. “Retail companies that have supply chains in the Middle East are especially susceptible,” says Janakiram.
Its new Refugee Leaders Index, developed in partnership with data firm Solactive, ranks the top-rated global companies on refugee economic integration and its Refugee Corporation Action Dataset covers the S&P 500, STOXX 600, and Solactive ISS ESG Screened Developed Markets indices.
He says the data is in its early stages, but notes its importance is likely to grow as regulatory pressure on human capital management increases. The US Securities and Exchange Commission (SEC) is looking to enhance human capital disclosures to include workforce diversity for example.
Janakiram predicts: “It will be important for investors and other organisations to have a fuller picture of corporate ESG performance, especially performance on the ‘S’ which has mostly been consigned to gender equality and DEI (diversity, equality and inclusion) when refugee issues truly get to the heart of the intersection of E and S.”
Refugee Investment Network (RIN) is another organisation that is developing capability in refugee investment. Tim Docking, CEO of RIN, says it is building a set of tools to help investors identify refugee investments, source them and measure their impact. “We’ve created a six-part taxonomy which has been crowdsourced with the community,” he says.
He says RIN also worked closely with those involved in gender lens investment tools, which have helped mobilised huge amounts of capital over the past years. “We realised if we made it [refugee lens] too constricting it’s really hard to get through investment committees so we’ve started broadly and can tighten things up as it develops.”
RIN is also doing research and market assessments in parts of the Middle East and the Horn of Africa to understand barriers for people who have been forcibly displaced to join workforces or access finance to inform policy recommendations.
And it is working in the UK on affordable housing for refugees. “There are not currently a ton of investable deals that in our parlance target the refugee community when they could be big ticket deals for investors [in housing that is] crucial in every displacement situation.”
Border surveillance and social media concerns
While the field building in refugee investment opportunities develops, some investors are already engaged from a risk management perspective – with border surveillance and social media in the spotlight.
Emma Pullman, Capital Stewardship Officer at Canada-based trade union BC General Employees Union (BCGEU), also speaking on Preventable Surprises’ webinar, successfully filed a shareholder proposal at media firm Thomson Reuters in 2021 over concerns that it provides software products used by agencies like the US Immigration and Customs Enforcement (ICE) to track, detain and deport migrants on a massive scale.
“The company’s technology has been directly linked to deportations and raids, potentially involving family separation and violating internationally recognised human rights,” she says.
More than 70% of independent shareholders, and 19% of shareholders overall voted in favour of BCGEU’s proposals that would have Thomson Reuters assess and report on the potential of human rights abuses of its work with ICE.
Students are also starting to pressure their universities to divest from border and surveillance companies. The UK Divest Borders campaign scored its first victory last October when Cardiff Metropolitan University announced it would divest from all border industry companies as part of a new wider approach to not invest in “companies or activities which are considered to be unethical” and which “threaten community and international stability”.
The pressure on border surveillance will continue this AGM season with two repeat proposals being filed at Amazon over human rights concerns on the use of its facial recognition technology by border surveillance industry customers.
There are also handful of proposals this year targeting social media companies for enabling hate speech. Pinilla from Zevin Asset Management predicts these companies will start to face more investor pressure over their platforms’ roles in disseminating misinformation and hate against refugee and immigrant communities.
The increased politicisation and vitriol involved in debates on refugees could start to make investor attention controversial, especially as anti-ESG sentiment sweeps parts of the US. Even some attendees at Preventable Surprises’ webinar argued that refugees were a matter for politics, not finance and questioned cited research finding movement of people benefitted economies financially.
Pomfret notes the same journey happened with climate change before it became an investor priority.
“A decade ago, investors talking about climate change was an outlier phenomenon,” she says. “It wasn’t the political imperative it is today. But when investors started to talk about climate as a question of financial stability, as a question of opportunities and risk it moved. Things didn’t change overnight. There were lots of levers that had and still have to be pulled. But it made it possible for investors to say this is an issue we have to prioritise. I feel that forced migration could be something similar.”