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NYU Stern finds gaps in social performance metrics assessing business impacts on human rights on the ground

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Article
17 March 2017

Press release: "Report Reveals Gaps in Social Performance Metrics Needed By Investors to Identify Leading Companies"

Author: NYU Stern Center for Business and Human Rights

Putting the ‘S’ in ESG: Measuring Human Rights Performance for Investors...examines 12 leading frameworks for assessing companies’ social practices and impacts. It finds that current measurement is overly deferential to companies to voluntarily disclose the efforts they undertake on a wide range of poorly defined “social” activities, rather than measuring their real-world effects. The report outlines several principles for improving companies’ social measurement:

  • Shift measurement from companies’ social policies and practices to the effects these are having on workers and communities on the ground
  • Diversify data sources
  • Develop clear standards that enable comparisons of industry competitors using a common framework
  • Target investors as the primary audience

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Article
17 March 2017

Putting the “S” in ESG: Measuring Human Rights Performance for Investors

Author: Casey O'Connor & Sarah Labowitz, NYU Stern Center for Business and Human Rights

Over the past three decades, a multi-faceted industry has evolved to offer reporting services on ESG factors to investors and other stakeholders. Investors should be able to rely on the ESG industry to provide data that helps them identify strong performers and assess risk. When it comes to evaluating companies on their toxic waste emissions (“E”) or vulnerability to fraud and corruption (“G”), investors now have tools to assist them. But our analysis of 12 leading ESG frameworks shows that the ESG industry is still falling short of this objective when it comes to “S”. We conclude that there are four fundamental gaps: 1. Social measurement evaluates what is most convenient, not what is most meaningful. 2. Current approaches to disclosure are not likely to yield the information needed to identify social leaders.3. The lack of consistent standards underpinning social measurement increases costs and creates confusing “noisiness” across the ESG industry. 4. Existing measurement does not equip investors to respond to rising demand for socially responsible investing strategies and products.

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