Investors demand sharper focus on human rights in sustainability reporting

An investor coalition – managing assets of more than one trillion US dollars, including Impax Asset Management, The Universities Superannuation Scheme and Sycomore Asset Management – has called on the International Sustainability Standards Board (ISSB) to make human capital and human rights a priority for its next set of global reporting standards.

The letter, coordinated by responsible investment NGO ShareAction and signed by 24 investors across the globe, states that investor demand for greater volumes of better-quality workforce data “is at an all-time high”. It urges the ISSB to “to prioritise researching human capital and human rights disclosure standards in its upcoming two-year work plan”.

The investors span six countries and include a mix of asset managers and asset owners. They have co-written to the ISSB specifically in response to its Request for Information (RFI), launched in May, that seeks feedback on which area of sustainability to focus its next set of standards on.

James Coldwell, head of the workforce disclosure initiative at ShareAction said: “This is an opportunity for the ISSB to set the global reporting baseline needed for investors to be able to understand and take meaningful action on labour and human rights abuses.”

“We know that workers around the world face exploitation by unscrupulous companies, harming the workers themselves and creating risks for investors. Tackling these issues can only be achieved when there is transparency around corporate practices – something the ISSB is perfectly positioned to deliver. This is why we’re calling on them to prioritise research into human capital and human rights, to develop a globally accepted reporting framework,” he added.

Crucially, the letter also calls on the ISSB to consider “how to disclose human capital and human rights information together” by addressing the relationships and connections between the two topics. It argues that in practice neither companies nor investors treat the two topics as totally separate areas.

Human rights due diligence processes, for example, are used as key tools for identifying labour issues. Concepts such as unionisation and modern slavery clearly belong to both categories, said the group.

This letter follows a recent ShareAction opinion poll commissioned to gauge the views of british adults on how they felt about where their money was invested. The results showed an overwhelming majority (74%) of people would have a more negative view of financial institutions that invest in companies that fail to meet human and labour rights standards, said the investor group.

Vincent Kaufmann, CEO of Ethos Foundation, which represents 251 Swiss pension funds and public utility foundations, said: “Covid-19 – and the subsequent mass fluctuation it caused in the labour market – has emphasised just how critical human beings are to the long-term success of any business.”

“Be it good people management within the workforce, or comprehensive human rights due diligence across the supply chain, an organisation that prioritises human wellbeing stands the best chance of succeeding in the future. As the financial materiality of these issues becomes increasingly clear, it is crucial that investors have access to comprehensive and comparable social data from businesses to help inform investment decisions. It is imperative the ISSB prioritises developing human capital and human rights standards as soon as possible to help deliver this,” he said.