A group of 101 international investors representing over US$4.2 trillion in assets under management have joined forces to call on governments to put in place regulatory measures requiring companies to conduct ongoing risk management regarding risks to people associated with their business activities. Known as “human rights due diligence,” this process involves a company assessing and addressing harms to people in connection with its business, and publicly disclosing these efforts.
The statement, coordinated by the Investor Alliance for Human Rights, makes the ‘investor case’ for regulatory measures that facilitate corporate accountability for human rights harms, particularly where voluntary corporate measures continue to leave significant gaps in human rights protections.
“Aviva Investors is proud to support this statement encouraging Governments to require companies to undertake human rights due diligence.The Corporate Human Rights Benchmark shows that a large number of high impact companies are failing to report on any human rights due diligence at all,despite detailed guidance produced by the United Nations almost a decade ago. A purely voluntary approach has clearly failed, creating risks for individuals, companies, and investors and harming the long term societal mandate of markets. It is important that Governments introduce meaningful mandatory human rights due diligence regimes, particularly for large companies in high impact sectors. Without compulsion, it is clear that corporate laggards will continue to free-ride on the rights of others,” said Steve Waygood, Chief Responsible Investment Officer at Aviva Investors.
Companies have long-engaged with the concept of due diligence through investigative processes that aim to identify financial risks associated with business transactions. Human rights due diligence is a continuation of those established risk management processes that takes the lens of risk to people, recognizing that where there are the most severe risks to human rights, there are material risks to business, including reputational harm, financial loss, and legal liabilities.
“Human rights due diligence enables investors to adequately identify and assess salient human right risks across our investment portfolios. Importantly, it can help companies mitigate risks to employees, communities, and other stakeholders, manage potential financial and legal risks, and, ultimately, enhance shared value creation. It simply makes for better-run companies. And from a global perspective, mandatory human rights due diligence brings opportunities to improve economic productivity, reduce inequalities, and improve livelihoods – all integral to achieving the UN Sustainable Development Goals,” said Alice Evans, Co-Head and Managing Director, Responsible Investment at BMO Global Asset Management.
The investor statement brings together a coalition of asset managers, public pension funds, and faith-based investors from 13 countries across 4 regions. It demonstrates that responsible investors around the globe are increasingly coalescing around the need to ensure that companies integrate respect for human rights at the heart of their business.
“The current pandemic has exposed the harm and suffering created by companies’ lack of human rights due diligence. The harm is felt especially by the millions of women and migrant workers dismissed and abandoned at the bottom of supply chains. Results are showing that responsible companies perform better in the pandemic – for their workers and suppliers as well as for their investors. The investor voice is now critical to persuade governments to set human rights due diligence as a minimum floor of corporate behavior. Both sustainable economic recovery post-COVID-19 and the future credibility of global markets to deliver shared prosperity depend on it,” said Phil Bloomer, Executive Director at the Business & Human Rights Resource Centre.
The statement is sent to government contacts across the represented regions, including policymakers within the European Union, the United States, and Canada.
“Governments have a crucial role to play in the transition towards a sustainable and fair society. This industry-wide call for mandatory human rights due diligence shows that the time is right for action. The public sector should take charge and ensure all companies care for people, before thinking of making profit,” said Paul Tang, Member of European Parliament.
See the investor statement and list of signatories here.