94 Investors with Over US$6T in Assets Voice Support for Mandated Corporate Human Rights and Environmental Due Diligence in the E.U.
Legislation and enforcement mechanisms seen by investors as critical to identify and address human rights and environmental risks, clarify the standards expected from businesses, and create a level playing field.
NEW YORK, NY, THURSDAY, OCTOBER 7th, 2021 – A group of 94 investors with more than US$6T in assets under management and advisement today reaffirmed their support for mandated human rights and environmental due diligence in the EU.
The statement was organized by the Investor Alliance for Human Rights, a global coalition of investors committed to embedding the UN Guiding Principles for Business and Human Rights (UNGPs) into investor actions, and sent to relevant European Commissioners and their staff as well as members of the European Parliament.
The EU is currently awaiting a legislative proposal from the European Commission on Sustainable Corporate Governance that among other things would require companies to account for their human rights and environmental impacts or possibly face legal and administrative consequences.
At present, only a minority of companies demonstrate the necessary willingness and commitment to take human rights seriously. A 2020 ranking by the Corporate Human Rights Benchmark found that nearly half of the 230 largest publicly traded companies in high-risk sectors received a score of zero when measured against five human rights due diligence indicators. The investors say reliance on the voluntary actions of companies is no longer adequate.
"As more and more investors scrutinize the impacts of their investments on people and planet, the investor case for mandated human rights and environmental due diligence is undeniable,” said Rebecca DeWinter-Schmitt, Associate Director of the Investor Alliance for Human Rights. “Robust and enforceable due diligence allows for risk identification and mitigation while simultaneously enabling positive contributions to a sustainable economy. It will create a level playing field with consistent expectations of companies and investors, establish clear lines of responsibility and accountability, encourage much needed transparency, and promote engagement with affected stakeholders.”
Whether the upcoming EU directive on corporate due diligence will make an actual difference on the ground will depend on the details of this legislation. For this reason, investors and civil society have been calling on the Commission to make sure the directive ensures corporate accountability for human rights and environmental impacts through administrative and civil liability, and access to remedy for affected people. The investors say the involvement of directors is paramount to ensure that the necessary strategic decisions are made and integrated into overall corporate strategies and business operations.
"The upcoming EU legislative proposal will finally ensure a level playing field for companies to carry out sustainability due diligence following the UN and OECD standards,” said Susanna Arus, Communications and EU Public Affairs Manager at Frank Bold. “Investors and civil society are united in calling for an ambitious and effective proposal including the full value chain, considering needed enforcement and civil liability provisions as well as clarifying the involvement and responsibilities of boards in such strategic matters."
The statement includes additional recommendations for the legislative proposal regarding reporting scope, alignment with international frameworks, access to remedy, and enforcement and governance. It highlights significant gaps in current legislative mechanisms and emphasizes the responsibilities of small and medium-sized - not just large - business enterprises, recognizing that they are all part of the same value chain.
“Mandatory human rights and environmental due diligence by all companies will help both companies and investors identify their greatest human rights and environmental risks and fulfill their responsibilities,” said Nina Roth, Director, Responsible Investment, BMO Global Asset Management. “As fiduciaries, this legislation will allow investors to make more informed investment decisions and demonstrate to beneficiaries that their money is being managed in line with international standards and expectations.”
“It is crucial that all businesses conduct environmental and human rights due diligence since the protection of these rights form the basis of our ability to undergo the transition to a sustainable economy,” said Greta Fearman, Senior Responsible Investment Officer at ACTIAM. “Current corporate behavior reflects insufficiencies in the management of these rights, leading to negative impacts on workers and communities and irreversible environmental damage, while also exposing our investment portfolios to risks. Mandating these due diligence processes aligns with ACTIAM’s investment approach to deliver long term financial, environmental and social returns and to have a positive impact on the real world.”
Said Heidi Hautala, Chair of the European Parliament’s Responsible Business Conduct Working Group, "Systemic challenges need systemic solutions. One company may not change the world alone, but when sustainability is brought into the core of the private sector, this has the power to change the world. This truly is a Brussels moment. The EU is in a position to lead the way and to create a global standard for sustainable business."
About the Investor Alliance for Human Rights
The Investor Alliance for Human Rights is a collective action platform for responsible investment that is grounded in respect for people’s fundamental rights. Its members include asset management firms, public pension funds, trade union funds, faith-based institutions, family funds, and endowments. Collectively, they represent over US$5trillion in assets under management and 19 countries. The Investor Alliance is an initiative of the Interfaith Center on Corporate Responsibility.
Visit our website at: https://investorsforhumanrights.org/ and follow us on Twitter: @InvestForRight