Focus on Human Rights Fundamental to Advancing ESG Investing

PRI outlines a three-step approach for integrating respect for human rights into investment practices.

Businesses and investors have a responsibility to respect human rights, and follow the guidance of the UN Guiding Principles (UNGP), according to speakers on the ‘Human rights: an investor framework’ panel session at a two-day EMEA Digital Forum held by the Principles for Responsible Investment (PRI).

Speaking on the panel, Steve Waygood, Chief Responsible Investment Officer at Aviva Investors, said even minority investors can assert influence, particularly when acting in concert.

“Where an issue is raised to us by civil society, or by regulators, or the media, we have a duty, which is enshrined in the OECD guidelines, to engage with companies and raise concern,” Waygood said.

Originally drafted by Organisation for Economic Cooperation and Development (OECD) in the 1970s, the Guidelines for Multinational Enterprises are the first international instrument to integrate respect for human rights as a corporate responsibility and align with the UN’s Guiding Principles on Business and Human Rights.

Waygood said asset owners should use their voice to raise human rights concerns, pointing out the range of options available for escalation. “If they don’t respond to your issues, you can vote against the pay, vote against the reporting accounts, you can file shareholder resolutions, even as minority investors. If all fails, you still have recourse to the media,” he said.

Also speaking at the event, Dante Pesce, member of UN Working Group on Business and Human Rights, said the UN Guiding Principles are designed to “equip investors with a framework that can be applied across portfolios, regardless of sectors and locations”, informing investment decision-making, stewardship activities, and due diligence processes and remedy practices at investee companies.

The panel session coincided with the release of a new report by the PRI, titled ‘Why and How Investors Should Act on Human Rights’, which outlines a three-step approach for investors to integrate respect for human rights into their investment practices.

First, the report recommends investors establish a policy commitment to respect human rights, approved at the most senior level and integrated into governance frameworks, management systems, investment beliefs, policies and strategy “to inform investment decisions, stewardship of investees and policy dialogues”.

Second, it recommends the implementation of human rights-focused due diligence processes, with management of actual and potential negative outcomes reflected in investment decision-making process, including in portfolio construction, security selection and asset allocation, and/or manager selection. Third, the report calls on investors to provide access to remedy for people affected by their investment decisions when the investor is either contributing to or causing the negative outcomes.

The PRI plans to introduce human rights questions into its Reporting Framework on a voluntary basis by 2022, before making it mandatory in the years to follow.

“Our signatories have made it clear that they want the PRI to increase its focus on social issues, including human rights,” said CEO Fiona Reynolds. “In five years’ time we’ll see all signatories incorporating human rights into their investment process. Implementing the UN Guiding Principles on Business and Human Rights across business and investment activities has the potential to deliver a transformational contribution towards achieving the UN Sustainable Development Goals, with obvious benefits for people, planet and prosperity.”

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