A/HRC/4/99
page 13
Secretary-General of the United Nations invited a group of the world’s largest pension funds to
join a process to develop the Principles. The process was coordinated by the United Nations
Global Compact Office and the UNEP FI. Today more than 100 asset owners and investment
managers accounting for more than US$ 5 trillion of assets have committed to the PRI.
The WCW is a platform aimed at the implementation of principles such as the PRI in day-to-day
business. Its goal is to advance best practice and develop tools and methodologies, focusing on
enabling investment managers, financial analysts and investment brokers to integrate ESG
considerations in their daily work.
Discussion
42.
Discussion initially focused on the issue of the fiduciary duty of financial institutions and
whether non-specialized investors who manage assets on behalf of their clients have the mandate
to consider human rights issues. A socially responsible investor may include human rights in its
prospectus and therefore have a legal obligation to consider related issues, but it was suggested
that fiduciary duty does not impose a barrier to other kinds of investors considering human rights
issues. For example, public pension funds have no such explicit mandate, but have deemed that
there are no restrictions and that it is in fact appropriate to engage on labour and other human
rights issues.
43.
The concept of materiality of human rights issues was highlighted. It was suggested that
from an investor perspective, human rights was unlikely to comprise a significant risk variable in
a large diversified public Western company, as opposed to a project-specific company in the
developing world. There was uncertainty among some participants about what enhanced
analysis on human rights issues would yield, although examples were shared of research that
showed links between human rights issues and financial performance.8 It was further suggested
that human rights issues could be considered indicators of the quality of management, i.e. a good
record on the environment and diversity indicates a strong management team. However,
examining human rights issues at the company level could have limited impact, as many
investors now hold broad market indices and therefore do not consider the specific record of
individual companies. There was a warning against reducing everything to financial metrics,
since it could lead to companies worrying more about other issues such as climate change than
about human rights.
44.
The role of rating agencies in human rights, for example with respect to the materiality
issue, was highlighted, and reference was made to some rating agencies that are exploring ESG
issues.
45.
It was suggested that it is difficult to screen stocks on human rights criteria due to lack of
data, which means that such issues are addressed more through engagement. Companies can be
influenced in many ways, for example proxy holding, and leverage is dynamic, i.e. a company
may be encouraged to meet higher standards at one point in time, but investors can always sell
their shares at a later date. Some parts of the investor community do not screen companies but
8
See e.g. sristudies.org, Marc Orlitzky, Frank L. Schmidt and Sara L. Rynes “Corporate social
and financial performance: a meta-analysis”, Organization Studies, 24, 2003.
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