UN PRI urge investors to consider human rights in their decisions

On the 10/22/20 at 2:44PM


Adrien Paredes-Vanheule

The Principles for Responsible Investment propose a three-step process for investors to commit more to the respect of human rights but there is way to go for the investment industry.

Drawing more focus on the S part of the Environmental, Social and Governance (ESG) criteria is the main ambition of the United Nations’ Principles for Responsible Investment’s latest report on investors’ reasons and ways to act on global human rights and put that topic into their decision making process.The human rights question is gaining ground within the institutional investor community. A recent example has been last August's letter sent by 38 institutional investors to 54 companies operating in Gulf states, including mutlinationals, about their recruitment practices and safeguarding processes around migrant workers in that region.

“Our signatories have made it clear that they want the PRI to increase its focus on social issues, including human rights,’ said PRI CEO Fiona Reynolds. “And we have seen social issues really come to the fore during the COVID-19 pandemic. Our aim is that, like with climate change, in five years’ time we’ll see all signatories incorporating human rights into their investment process. Implementing the UN Guiding Principles on Business and Human Rights across business and investment activities has the potential to deliver a transformational contribution towards achieving the SDGs, with obvious benefits for people, planet and prosperity.” 

PRI’s report proposes three steps for investors to demonstrate their respect of human rights, the first of which is publishing a policy commitment. “The report recommends investors establish a policy commitment to respect human rights, approved at the most senior level, throughout the organisation with proper resourcing. The commitment should be integrated into governance frameworks, management systems, investment beliefs, policies and strategy to inform investment decisions, stewardship of investees and policy dialogues,” explained the organisation. In May 2020, the British non-governmental organisation ShareAction had concluded in a report that 61% of the 75 largest asset managers worldwide had a weak or non-existent approach to engagement on human rights.

As a second step, the UN PRI’s report makes the case for the setting of due diligence processes. It recommends that management of actual and potential negative human rights outcomes be reflected in investors’ investment decision-making process, including in portfolio construction, security selection and asset allocation, and/or in selecting, appointing and monitoring external managers/funds and other services providers. The ShareAction study reported that 72% of the 75 largest asset managers were not engaging on international human and labour rights frameworks with companies they invest in.

The report advises as third step that investors should “provide access to remedy” for people affected by their investment decisions when they either contribute to or cause the negative outcomes. The organisation said it will introduce human rights questions into its reporting framework initially on a voluntary basis by 2022, before becoming mandatory in the years to follow. 

Commenting on the report, Laetitia Tankwe, advisor to the president of the board of trustees of Ircantec, said: “Human rights have for too long been put aside by investors, partly because of a lack of understanding of the impacts of human rights on their investments and the impacts of their investments on human rights, and partly because even when they are well aware of these different consequences, investors were struggling to put in place a consistent approach to address them. With the PRI paper, investors have the support they need to give human rights the consideration they deserve.”