Op Ed, Peter Kraneveld: How pension funds could use the OECD’s Multinational Guidelines

Fruitful co-operation could come because of alignment, argues pension expert.

What happens if a serious international organisation is thinking about how business ought to behave? They create a cloud of information, procedures and odd allies that pension funds may be able to tap into as a resource for their ESG or SRI policies.
The Organisation for Economic Cooperation and Development (OECD) started out as a Marshall Aid distribution mechanism, developed into a cold war research tool, and is now finding a new role as the conscience of capitalism. In that role, it has constituted the Guidelines for Multinational Enterprises good language on what the OECD calls “Responsible Business Conduct”, or RBC to those who use those multi-syllable words often. The key word is “guidelines”. This is not regulation. The OECD doesn’t make international law. Non-observance of the guidelines carries no penalties. Nevertheless, the guidelines are a highly interesting set of benchmarks and best practices to judge the actions of international businesses by.
The project is reinforced by national contact points (NCP), a person or organisation in each member-country of the OECD that receives complaints about behaviour not in compliance with the guidelines. The NCP are national organisations and they differ greatly. The UK NCP will subsidise a mediation process if it can get the parties around the table. Others will offer their own services only. Some basically do nothing. There is no evaluation process; even statistics are rare.Nevertheless, the NCPs are a depository of information on the conduct of companies that either have their HQ in the country or operate there.
Some non-governmental organisations (NGOs) whirl around the guidelines. A good example is OECD Watch, an organisation that facilitates making complaints and approaching the NCPs. The Trades Union movement’s contribution is a guide to the Guidelines and the NCPs.
Pension funds implementing an ESG or SRI strategy face two problems: they are invested in a very large number of companies, and information on the conduct of these companies is chaotic, of uneven quality, hard to access and sources are not always reliable. Since the NCP differ per country, it may be more or less difficult to get access to their information, but it should be reliable and even-handed enough to raise warnings and dispel myths. Some NCPs write findings (conclusions) when a case is concluded, which should be of help to pension funds.
Pension funds should take into account that the objective of the NCP is to mediate, not to come to a judgement. Similarly, NCPs should realise that pension funds’ interests are predominantly in the field of risk management, not maintaining human rights or applying the OECD guidelines. Yet, the interests of both parties are aligned enough for fruitful cooperation.

Peter Kraneveld is an active retired international pension expert and Secretary of the Association for European Retirement Education (AERE)