Dutch pension investment giant APG has reached agreement in a case brought by a group of NGOs under the OECD Guidelines for Multinationals relating to investor responsibility at the companies where they have shareholdings.
The case, relating to the €334bn investor’s 0.084% stake in South Korea-based POSCO and its controversial plans to build a combined steel and power plant in Odisha, India, had also drawn in fellow investment giant Norges Bank Investment Management.
Four NGOs – Lok Shakti Abhigan, KTNC Watch, Fair Green and Global Alliance and Forum for Environment and Development – had claimed the $12bn plant would lead to the displacement of around 22,000 people.
They said APG had not taken appropriate steps to prevent or mitigate the negative impacts of POSCO’s activities on human rights and environmental rights.
Now the Dutch National Contact Point (NCP) for the Organisation for Economic Development and Coordination’s Guidelines for Multinational Enterprises has announced in a final statement that the parties have reached agreement.
The issue is seen as an important ‘soft law’ test case covering investor responsibility in the actions of the companies they invest in, although the Guidelines have no binding legal force.
The Dutch NCP says: “APG, which manages the investments of ABP and other pension funds, has taken its responsibility as a minority shareholder and acted in accordance with the OECD Guidelines.
“APG is applying the OECD Guidelines and using its influence in the framework of its investment policy to prevent or mitigate adverse impacts.
“This means that investors and other financial institutions have a responsibility to exert influence where possible on companies they invest in to help prevent or mitigate possible adverse impacts.” Although it adds that expectations about the influence minority investors can exert “must be realistic”.The NCP says the investor is clear that it expects its portfolio companies to act in accordance with the principles of the UN Global Compact, and calls them to account if necessary.
“The (large total) size of its fund, its stated prominent role in international sustainable finance and its cooperation (including coalitions) with other similar funds in this case outweighs its small shareholding in the perspective of leverage with POSCO,” the NCP says. It appreciates APG’s “ongoing efforts and commitment” to use its leverage with POSCO.
Earlier, the Norwegian contact point said in a separate judgment in May that NBIM had breached the guidelines and lacked a strategy for identifying and handling violations of human rights in portfolio firms. This led to a riposte from the central bank to the OECD warning of a potentially “untenable” situation if the guidelines were to be applied to minority investors.
In contrast, the Dutch government has welcomed the NCP’s “balanced” statement.
“I would like to underline that enterprises bear responsibility even for adverse impacts to which they have not contributed when that impact is directly linked to them through a business relationship,” said Lilianne Ploumen, Minister for Foreign Trade and Development in a letter to Dutch NCP Chairman Frans Evers.
“The government expects all Dutch enterprises to comply with the OECD guidelines, irrespective of the country in which they operate.”
The Dutch NCP says its Korean counterpart claims the human rights and environmental issues raised are not linked to POSCO and rejects the case. The Dutch NCP wants greater coordination among NCPs, saying: “The credibility of the OECD Guidelines themselves seems at stake here.” Communication between the various NCPs “proved to be very difficult in practice”.