The Principles for Responsible Investment (PRI) is developing a five-year plan for its signatories to incorporate human rights into their investment processes, including mandatory reporting on human rights as part of its existing disclosure framework.
The move comes as human rights rises up the agenda for investors. This month, nearly 40 investors wrote to companies about the protection of migrant workers from debt bondage and slave-like conditions, while some of Europe’s largest asset managers, including Legal & General Investment Management and Standard Aberdeen Investors, back calls for mandatory company disclosure on human rights.
Speaking to RI, Fiona Reynolds, Chief Executive of the PRI, who chaired a commission on modern slavery and human trafficking, said: “Signatories have made it really clear to us that they wanted the PRI to do more on social issues, including human rights.”
She added that the PRI had always undertaken work on the issue focused on specific sectors, but that Covid-19 had highlighted social issues such as human rights to its signatories.
“Investors understand the importance much more now,” she said. “If I go back and think about climate change five years ago, some investors didn’t understand the issue or how to integrate it. My aim is that, like with climate change, in five years’ time we’ll see that all of our signatories are incorporating human rights into their investment process.”
The five-year programme, currently under consultation, will be underpinned by the UN Guiding Principles on Business and Human Rights (UNGP) and will integrate human rights considerations across all topics – investment allocation, stewardship activities, dialogue with policymakers, and disclosure and reporting.
It will encourage signatories to report on human rights, first on a voluntary basis, and eventually on a mandatory basis within the PRI reporting framework. It will also include adopting a human rights policy and identifying negative human rights impacts as a first step.
"My aim is that, like with climate change, in five years’ time we’ll see that all of our signatories are incorporating human rights into their investment process" – PRI’s Fiona Reynolds
Reynolds said the PRI already had “amazing signatories doing fantastic work on incorporating the UNGP into their investment process”, but they were a minority. “It is far from the norm that investors incorporate human rights into what they do,” she said.
The consultation says that, in instances when an investor cannot prevent or mitigate a human rights violation, divestment should be considered. But, it adds, if an investor cannot fulfil their given mandate by divesting, they should document their reason for staying invested, and communicate this to stakeholders.
Commenting on this approach, Reynolds said: “There is no supply chain in the world, if you dig deep enough, that won’t have huge human rights violations, modern slavery or human trafficking issues. They are there if you look hard enough. What we need to do as an investment community is to celebrate the companies who come out and talk about what they’ve found and what they are going to do about it.
“We don’t need to demonise those companies, because that means people don’t want to look at these issues. It’s only by doing your due diligence that you can then identify and move on to do something about it.
“In five years time, I want investors to think about human rights as a risk and how to manage that risk. But also thinking about the impact that investments have on human rights and on the real world in much the same way that we do with climate change. And we’re a long way from there.”
The PRI is holding a webinar on its human rights consultation on the 8th September and its consultation is open for member feedback until 18th September.