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Keynote address by John Ruggie at PRI Digital Forum Americas calls on institutional investors to push for global ESG standards

Institutional investors have a significant role to play in addressing the unsustainable economic and social inequalities and other forms of human rights harm built into our current system. The PRI human rights framework provides you with a tool to help secure the social sustainability of a global economy that works for all.

My aim today is to put your initiative in the context of a rapidly evolving national and international regulatory developments in business and human rights, in order to underscore the initiatives timeliness and importance...

The Guiding Principles ascribe obligations to governments and business alike...

So, how does this relate to institutional investors. I’ll make three points.

First, institutional investors are businesses in their own right... [Y]ou are linked to operating companies even if, individually, only on a small scale. Under the Guiding Principles your human rights responsibility is to use whatever leverage you can, individually and collectively, to ensure that investee-companies do in fact respect human rights.

Second, PRI membership from the beginning in 2006 has required you to seek ESG disclosure by entities in which you invest, as well as to incorporate ESG issues into investment analysis, decision-making, ownership policies and practices, and engagement with investee firms.

If you look at the categories used by ESG data providers, most of the elements are human rights issues, with the rest being close cousins. So, while the PRI human rights framework may be new, the membership obligation to take human rights into account, embedded in the S, has been there all along but rarely highlighted in the past.

My third point concerns the elephant that just lumbered into the room: materiality. No divine being defined materiality; it is a matter of judgment... And judgments about what gets sifted through that filter increasingly must involve human rights. The reason is a combination of fact pattern, practical experience and law.

...ESG funds have performed as well if not better than conventional funds...

In the past, operating companies often discounted human rights risks as not material... In those cases, the result often has been operational and reputational harm to the business, and potential legal and financial consequences...

In addition to ESG performance and learning from practical experience, the scope of judgment regarding materiality is narrowing because a growing number of jurisdictions are transposing the Guiding Principles due diligence provisions into domestic hard law...

I have focused on the responsibilities of institutional investors as businesses. You might say that I’ve made a business case for human rights. But, of course, you are also more than businesses. You are stewards for your ultimate beneficiaries...

Today, we truly are at an inflection point. The world is on fire, people are hurting, leadership deficits are common. As investors, you – we – need to try something different going forward: investing as though people and planet depended on it. Because they do. So, push for global ESG standards. Make sure you ask for – and receive – quality data from investee-companies and data providers, including on human rights issues. Support mandatory human rights due diligence. And practice it yourselves as you invest, engage, and vote your shares.