Back in March, the shambolic initial public offering of food delivery service Deliveroo saw a string of global asset managers, with over £2.5tn in combined assets, boycott the listing.
I was on leave that week, but the press line at PIRC [Pensions and Investments Research Consultants] was alive with calls from journalists keen to understand what just happened. Because it was Deliveroo, the story cut through to new audiences that wouldn’t usually care about the ups and downs of the stock market.
Alongside concerns about the gig company’s business prospects and governance, the asset managers involved highlighted the company’s employment model, which relies on self-employed, low-paid workers, as a key reason for withholding their money.
Taking preventative action over social risk in this way is significant and it’s certainly not business as usual. Whilst there have been well organised efforts among investors to take action over carbon reduction targets and other environmental issues, social standards – particularly in relation to employment rights – are often a blind spot.
It appears that generally, major investment managers are not acting as allies on labour rights
And there have been other, less high-profile moves of this nature. This year, Schroders quietly removed Amazon from an ESG fund on the grounds that it does not meet their criteria of being a socially sustainable company. This was encouraged by three UK-based charitable foundations: Friends Provident Foundation, Joffe Trust and the Blagrave Trust. They combined their assets and made the case to their manager, Cazenove Capital (an arm of Schroders), that a company with such a poor track record on labour rights has no place in the fund.
A third notable case was the decision taken last year by Aberdeen Standard to divest from online retailer Boohoo following the revelation that their Leicester-based suppliers were using sweatshop labour.
Obviously these decisions by investors are always bound up with financial and reputational interests and risks. But whatever the motive, there is evidently a shift happening on the ‘S’ of ESG. So how do employment rights and workforce issues fit into the picture – and who will drive this agenda?
Colleagues and I recently analysed voting data of a handful of asset managers on resolutions filed at US, UK, Canadian and Australian company AGMs that relate to labour rights.
The report we produced, which was supported by the Alex Ferry Foundation, focused on eight managers: Aberdeen Standard, Aviva, AXA, BMO, HSBC, Legal & General Investment Management, Robeco and Schroders. The resolutions covered issues like the living wage, putting workers on boards and monitoring labour abuses in supply chains. Unsurprisingly perhaps, we found a lot of opposition.
With the exception of a resolution filed at Amazon’s 2019 AGM to “end inequitable employment practices”, which was supported by all eight asset managers in the study, other seemingly innocuous resolutions (like one in support of the living wage for shop assistants at Canadian retailer Dollarama) were voted down by the majority. The same managers voted against a resolution at Australian supermarket Coles for the increased involvement of workforces in supply chain auditing processes. Suffice to say, it appears that generally, major investment managers are not acting as allies on labour rights.
But the wider interest in social and workforce matters does feel real – and it hasn’t escaped the attention of public policymakers. The UK’s Department for Work and Pensions is currently consulting on whether occupational pension schemes are taking account of social factors in their investment due diligence – and if not, what they plan to do about it.
The new attention is undoubtedly buoyed by the pandemic, which has made workplace safety and other employment issues the main topic of many shareholder-company Zoom calls. As we move on from this phase, it will be interesting to see which investors will translate this growing interest in these topics into actual policy and practice.
Foundation sector investors, a significant subset of institutional investors with around £69bn in assets, have the potential to punch above their weight on this front. They can stick their necks out on matters of social justice in ways that other investors can’t, or won’t.
As part of our recent research, we looked at 40 or so foundation investment policies and from the sample – less than a quarter mention labour standards, compared with over two thirds that take a stance on the environment. An obvious place to start for those who want to push the agenda along?
Read the full report here: Endowing Labour: Using Foundation Sector Capital to Improve the Rights Of Workers
Alice Martin is a labour specialist at Pensions and Investments Research Consultants (PIRC) and an Associate Fellow at the New Economics Foundation