IHRB guide calls for effective integration of human rights risk in investments

A new guide from the IHRB will help investors work with companies to ensure they have the systems and know-how to deal with human rights risks, Margaret Wachenfeld, director of legal affairs at the think tank, tells Liz Jones

Human rights risks now go well beyond the issue of child labour in supply chains these days. According to Margaret Wachenfeld, pictured right, director of legal affairs at the Institute for Human Rights and Business (IHRB) and lead author of a new investors guide, investors need to be aware that risk profiles are changing very rapidly and that risk issues change over time.

“There’s been a real pick up in the scope and depth of human rights issues in business and much wider issues being discussed,” Wachenfeld told Ethical Performance. “New kinds of companies and sectors are involved too. ICT, for example, where the issue of privacy and data protection are new on the radar.”

“Traditionally human rights risks involved sectors which engaged lots of labour or where there was an obvious impact on the environment – so manufacturing and mining for example. But these days you’d be hard pressed to find a sector that’s not affected.”

“The Guide can help investors work with companies to ensure they have the systems and know-how to deal with human rights risks,” Wachenfeld maintains.

Indeed, working within UN Guiding Principles, investors these days have a responsibility to evaluate human-rights-related risk across their portfolios. To help facilitate greater take up of this best practice requirement, the IHRB - in collaboration with Calvert Investments and the Interfaith Centre on Corporate Responsibility – has produced a guide that shows investors how to effectively integrate human rights into investment decision-making and corporate engagement.

Investing the Rights Way: A Guide for Investors on Business and Human Rights provides practical insights into how the globally accepted framework of the UN Guiding Principles on Business and Human Rights can help investors assess and address human rights risks in their portfolios and more effectively benchmark and engage the companies they hold.

The guide addresses mainstream investors across all asset classes and provides an overview of key developments, standards and resources.

Professor John Ruggie, former UN Special Representative on Business and Human Rights and Chair of the Institute for Human Rights and Business commented: “The UN Guiding Principles affirm that all companies have a responsibility to respect human rights in their operations and their business relationships. ‘Investing the Rights Way’ highlights strategies investors can use to help them prevent and remediate negative impacts.”

Wachenfeld says that one of the main messages of the report is that ‘the train is leaving the station’: “That’s meant to convey that after a 6 year process, the UN Guiding Principles are accepted and that investors and companies will be increasingly asked how they are applying those principles. What the report hopes is that at some point, those principles become a reflective part of every day business.”

Wachenfeld admits that human rights is not yet as high up the ESG agenda as it should be – “it’s not even where S or G are” - but believes it is only a matter of time: “It took a while for environmental issues to get recognition. There was a time when you’d look out over the city of London or New York at night and it would be ablaze with light. Then the realization of what a waste of energy that was got through and now flicking the switch at the end of the day is normal.”

Investors, managers and service providers can use the guide in a number of ways to engage with companies on human rights and screen companies in or out of a fund. It can also help benchmark or rank companies on their human rights performance against their peers and explore what lies behind a company’s public reporting statements. The guide can also help investors establish whether a fund, investor or company should invest in a particular region, country or sector.

Wachenfeld is keen to point out that the report is not just about raising the issue, but “gives investors a tool to help them ensure they are asking the right questions”. She admits that the report is basic but believes it can work on a number of levels: “It can help improve practices of more mainstream investors and make human rights part of the ‘S’ agenda for them. In the longer term, it can help in different asset classes such as equity infrastructure funds and human rights impact. It may also prove a way of providing more Key Performance Indicators to their portfolios.”

Ed Potter, Director, Global Workplace Rights with The Coca-Cola Company believes the guide has a wider audience: “Although this guide is written for investors, it also provides a succinct and clear roadmap for all companies on implementing respect for human rights and engaging with the investor community on human rights policies, human rights due diligence, and mitigation of human rights impacts.”