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9 Jun 2021

Danielle Essink, Human rights specialist in Robeco’s Active Ownership Team & Advisory Council member of the Investor Alliance for Human Rights

The UN Guiding Principles at 10: An investor perspective

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This month marks the 10th anniversary of the UN Guiding Principles on Business and Human Rights. The Guiding Principles provide a global authoritative framework for business and human rights and have clarified the role of business enterprises, including investors, to respect human rights. Looking back to the last ten years, what progress have we seen, both with investee companies as well as in the investor community itself?

In 2018, the UN Working Group on Business and Human Rights specifically called on investors to implement human rights due diligence as part of their own responsibility under the Guiding Principles, to more systematically require effective human rights due diligence by the companies they invest in, and to coordinate with other organizations and platforms to ensure alignment and meaningful engagement with companies. More and more investors are taking up this responsibility, supported by initiatives like the Investor Alliance for Human Rights, the Principles for Responsible Investment, the human rights benchmarks that rank listed companies, and the B-Tech and Valuing Respect projects.

These projects and initiatives are key to reaching the broader investment community as there are still some challenges to overcome. One key area is the need for investors and their data providers to tackle the issue of better "S" data for effective ESG analysis that will enable investors to address human rights risks and impacts in their portfolios. This will ensure a shift from assessing companies on material ESG issues towards an assessment that includes the salient human rights issues of investee companies, focusing on those issues at risk of the most severe negative impact.

More and more attention is being directed to the concept of “double materiality”, where saliency and materiality come together. We see this concurrence for example in the technology sector where salient human rights issues like privacy, freedom of expression, and discrimination are accompanied by material risks such as regulatory risk and public scrutiny. Where these risks overlap, taking human rights considerations into account is more straightforward as material risks come up in the ESG analysis many investors are already undertaking. However, we should not forget that the Guiding Principles establish the need to assess and address human rights risks and impacts to people first and foremost. That alone should be sufficient ground for investors to take action.

Looking at investee companies, while there is an increased number of companies that have a human rights commitment in place, consistent implementation through human rights due diligence (HRDD) is still lagging. Out of the 95 companies who scored zero across all HRDD indicators in the 2019 Corporate Human Rights Benchmark (CHRB) Report, 79 continue to score zero in the 2020 ranking. This represents a significant subset of the 106 companies scoring zero on HRDD indicators in the 2020 benchmark, nearly half of the 230 largest publicly traded companies in high-risk sectors assessed.

Robeco is one of 208 investors who are part of an initiative coordinated by the Investor Alliance for Human Rights, representing more than US$5.8 trillion in investment assets, that have published a statement urging companies assessed under the CHRB to publicly demonstrate their respect for human rights by conducting HRDD in their business operations.

While there has been some progress more needs to be done. How can investors move forward to ensure that the next decade will be focused on global implementation of the Guiding Principles and create better outcomes for people?

HRDD remains a powerful tool to identify, prevent, mitigate, and account for how a company addresses the most severe risks to people in connection to its business. For companies, HRDD makes business sense as the most effective means to systemically identify and manage salient human rights risks that often are also material business risks and can result in legal, reputational, operational, and financial liabilities. For investors, this means implementing HRDD within their own institutions and throughout the investment decision-making life cycle and across asset classes.

In a world exposed to increased conflict and shrinking civic space, companies and investors need to act. We need more investors to use their leverage and actively ask companies about their implementation of the Guiding Principles, including through enhanced HRDD in conflict-affected and high-risk areas and through efforts to protect the civic freedoms of human rights defenders so essential for a stable business environment. Investors should also look beyond their investee companies and seek partners across stakeholder groups, from civil society to policymakers. For example, investors can support calls for HRDD legislation necessary for a smart-mix of voluntary and mandated measures to create a level playing field for responsible companies and investors and spurn on improvements in the human rights situation of affected people and communities. Let’s make the next ten years count!

Danielle Essink, Human rights specialist in Robeco’s Active Ownership Team & Advisory Council member of the Investor Alliance for Human Rights

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