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13 Jun 2022

Open Society Foundations

Q&A with Investor Alliance for Human Rights: 'Why (Some) Investors Want More Regulation'

'Q&A: Why (Some) Investors Want More Regulation' 7 June 2022

As the EU works on rules to protect worker rights and the planet from corporate harm, Open Society’s Jon Jacoby spoke to Anita Dorett, of the Investor Alliance for Human Rights, about how investors are pushing for change.

Why are we seeing some large businesses... call for more regulation... regarding human rights and environmental protections?

...The principal reason is that businesses want a level playing field. [A]s a business leader, you... don’t want a gap—a set of rules, for example, that apply in the EU but not in the U.S. and the rest of the world, which is why we are pushing for robust mandated due diligence in other national jurisdictions...

Where are the gaps in the proposed [EU corporate due diligence] law?

...For example, due diligence should not be limited only to very large and large companies... We’d like to see a clearer formulation of directors’ duties for overseeing the implementation of due diligence measures. We also believe that the law should reduce barriers to victims’ access to remedies...

Despite these reservations, we are heartened to see the EU contemplating robust action...

...We’ve observed over recent decades that voluntary initiatives have been... insufficient to achieve widespread business respect for human rights... Scientific evidence tells us we are at a pivotal moment if we are to stop climate change. We need to hold companies to account for their impacts and empower human rights and environmental defenders to carry out their important work. 

The Investor Alliance for Human Rights represents shareholders with over $10 trillion in assets. When you speak to investors about these regulations, what do you hear?

[A] lot of the due diligence was focused solely on financial information... Now businesses are beginning to recognize that they need to... change their perspective. Now the question is more: how are people and the natural world impacted by your business over the long term?

[A]s a financial actor... investors increasingly recognize that we have our own responsibility to respect human rights and we want that reflected in our investments... Increasingly we are seeing institutional investors, private equity, and venture capital saying, “if we give you money, we want a robust due diligence plan that includes performance milestones address human rights risk. If you don’t meet them, you don’t get your money.” 

The Investor Alliance was designed to draw and build upon the playbook of investors focusing on climate action. Is that happening?

Yes, part of the lesson learned is that the investor’s voice can help shift the focus from a shareholder primacy lens to a broader stakeholder lens...