In a world where corporate actions have far-reaching social and environmental impacts, the investment community is being called upon to take a more active role in addressing human rights issues. At an Amsterdam panel discussion on Friday hosted by Morningstar, industry experts delved into the complexities of integrating human rights considerations into investment decisions and engagement strategies.
Human rights is an area that is not easy to define, given its broad and often nebulous nature. Spanning issues from diversity and inclusion to labour practices and the responsible use of technology, human rights has become increasingly intertwined with high-priority investor concerns around climate change, biodiversity, and corporate governance.
Regulatory pressures are also mounting, with initiatives like the European Union’s Corporate Sustainability Due Diligence Directive (CS3D) enshrining in law the need for companies to conduct human rights due diligence and develop transition plans.
Modern slavery
James Corah, head of sustainability at CCLA Investment Management, a UK-based firm focused on managing more than 2.5 billion pounds in assets for charities and faith organisations, emphasised the importance of recognizing that “human rights affects every investment in some way, shape or form.” For CCLA, this has translated into a laser-like focus on the issue of modern slavery, which they believe is present in the supply chains of nearly every company.
“There are 50 million people who live in the world in the state of modern slavery, and although you wouldn’t see it in the system analytics data, various people exist in the supply chain of nearly every single company,” Corah explained. Rather than simply mapping risks and disclosing issues, CCLA is pushing companies to take concrete steps to provide remedy to victims and prevent future occurrences.
‘Find it. Fix it. Prevent it’
“We need to make sure that companies are beginning to disclose that actually slavery is in their supply chain, not be embarrassed by that because it is there, and disclose what it is that they’re doing,” Gore said. The firm has developed a program to “Find it. Fix it. Prevent it.” and is working to establish clear benchmarks to track company progress.
Danielle Essink, social engagement cluster lead at Robeco, a large Dutch international asset manager, highlighted the importance of due diligence in identifying and mitigating human rights risks, particularly in the rapidly evolving realm of artificial intelligence (AI).
“AI is developing super fast. But what you see is that many companies, we focus mainly on the technology companies at the moment, but actually AI is everywhere, and I think there’s quite a lot of risks outside of the technology sector.”
Robeco’s new engagement programme
Robeco’s new engagement programme, she explained, prioritises deep, substantive dialogues with select portfolio companies. That approach involves seeking feedback from companies, particularly those involved in intensive dialogues, on the specific value they gain from the engagements with the firm. Essink said this approach encourages companies to challenge and expand the team’s understanding, while also aiming to provide them in return with improved insights and added value.
This goes beyond just the investor perspective; it includes the input of civil society organisations, regulators, and other stakeholders—what Robeco calls ‘ecosystem engagement.’ “Each player is relevant, and we must keep track of these developments to ensure our engagement remains as effective as possible,” Essink said.
The panellists emphasised that while exclusion and divestment may be tempting responses to human rights issues, a more constructive approach is to leverage investor influence to drive meaningful change. “Engagement is the key way for us, because the best way of mitigating human rights issues, particularly modern slavery, is to contribute to ending slavery,” said Corah.
Just transitions
Amol Mehra, director of industry programs at the Laudes Foundation, a philanthropic organisation focused on funding “just transitions’, acknowledged that the concept of human rights, even under international law, is constantly evolving, with new rights being recognised every few years. A “just transition” ensures that economic and industrial shifts, particularly toward sustainability, are fair and inclusive for workers and communities.
Mehra said human rights encompasses a broad range of ESG elements, going beyond just the “S” in ESG. “The reality is that while the ‘S’ encompasses human rights, human rights actually encompasses broadly ESG, so ‘E’ and ‘G’ elements are covered under that umbrella of human rights,” he said.
“Pure mitigation claims and pure mitigation efforts are not necessarily delivering the political and people capital that allows them to stay and to thrive,” Mehra said. This holistic view, he added, also is crucial for investors to adopt, he said, rather than siloing human rights into just the social domain.