The UN Working Group on Business and Human Rights published a report titled "Investors, ESG and Human Rights". The report examines how investors around the world are integrating environmental, social and governance (ESG) factors and sustainability practices into their investment approaches.
The link between financial investment and human rights is becoming increasingly apparent, although it is not yet fully understood. Examples of this are investment platforms that connect investors and human rights. The platform Investor Alliance for Human Rights includes over 240 members who collectively manage nearly $14 trillion in assets across 21 countries. A similar organization is also United Nations Principles for Responsible Investment (UNPRI), which has over 5 signatories and includes a diverse group of asset owners, investment managers and service providers. These organizations are dedicated to incorporating environmental, social and governance (ESG) indicators into their investment practices.
Conclusions:
- Risks of "greenwashing" and "human rights-washing" due to different ESG and sustainability approaches, without uniform definitions or global standards.
- The importance of regulations and consistency in applying standards for the integration of human rights in ESG criteria.
- Reconciling dual materiality with the UN Guiding Principles for Effectively Addressing Human Rights Impacts.
- The lack of human rights information in ESG ratings makes it difficult for investors to make informed decisions.
- Prioritizing human rights and environmental risks for investors is done through the integration of human rights into policies, due diligence and mitigation of adverse impacts.
- Access to equitable remedies is achieved through the cooperation of investors, companies, states and rights holders.
Recommendations
The report makes several recommendations to countries, investors and other actors. The most important recommendations with a focus on investors are:
- ESG and sustainability strategies to include human rights and governance engagement;
- Understanding the potential adverse impact of all investments by conducting human rights due diligence;
- Engagement with stakeholders;
- Conduct human rights due diligence in high-risk and conflict-affected areas; that investors use their sphere of influence to ensure that companies in which they invest respect human rights standards and, if such standards are not met, have the responsibility to withdraw from such investments under the UN Guiding Principles;
- To provide adequate means of protection for the affected people;
- To invest in training and capacity building, research and sharing of good practices, and finally to ensure transparency and the collection of standardized human rights data.
Still wondering why we should care about the social impact on people when investing is primarily about making sound financial decisions and maximizing profits?
Governments create laws and systems so that investors and businesses can thrive. My simple answer is that we rely on people for everything. As one of my mentors once said, "Why care about the environment if we lose people?" Likewise, why focus on investment, profits and growth if we ignore the impact on the lives of the people we touch in our pursuit of wealth.