Investors and human rights

Тhe OHCHR Working Group on Business and Human Rights released a report called “Investors, ESG, and Human Rights” which explores how investors worldwide integrate environmental, social, and governance (ESG) factors and sustainability practices into their investment approaches. While not quite visible yet, the relationship between financial investment and human rights is becoming more evident. This could be seen through the different investment platforms connecting investors and human rights.

The Investor Alliance for Human Rights platform includes over 240 members collectively managing nearly $14 trillion in assets across 21 countries. Similarly, another such organization is the UN Principles for Responsible Investment (UNPRI) which has more than 5,345 signatories and comprises a diverse group of asset owners, investment managers, and service providers. These organizations are dedicated to incorporating environmental, social, and governance (ESG) considerations into their investment practices.

Findings

• Risks of greenwashing and human rights-washing due to the variation in ESG and sustainability approaches with no uniform definitions or global standards
• Importance of regulation and consistent standards that could help integrate human rights considerations into the ESG criteria.
• Aligning the double materiality approach with the UNGPs to address human rights impacts effectively.
• ESG ratings are often unclear and lack human rights data, necessitating better information from investees for informed decisions.
• The importance of prioritising human rights and environmental risks for investors by integrating human rights into policies, conducting due diligence, and mitigating negative impacts.
• Access to remedies and equitable, accountable investment frameworks will be realized through the cooperation of investors, investees, states, and rights holders.

Recommendations

The report makes several recommendations for the States, investors, and other actors. The most important ones with a focus on the investors are ESG and sustainability strategies to include human rights and engagement of the decision-making body; understating the potential adverse impact for all investments by conducting a human rights due diligence; engaging with stakeholders; conducting human rights due diligence in high risks and conflict-affected areas; investors to use their influence to ensure that the companies they invest in follow human rights standards and if such standards are not followed to have the responsibility on withdrawing from such investments following the UNGPs; ensure adequate remedy for affected people; invest in training and capacity building, research and sharing good practices and finally ensure transparency and collection of standardized human rights data.

Are you still questioning why we should care about people when investing is primarily about making smart financial choices and maximizing profit. Governments enact laws and frameworks that enable investors and businesses to prosper. 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 the people?” Similarly, why focus on investments, profits, and growth if we disregard the impact on the lives we affect in our pursuit of wealth?