This article forms part of CAER’s ‘Responsible Investment Agenda 2018 – A Work Plan for Australian and New Zealand Investors’ Report
Human rights dominated the ESG space in 2017, and will continue to sit firmly at the forefront of public sector, investor and company agendas in 2018.
In January 2018, Australia began its three-year term on the United Nations Human Rights Council, which is responsible for protecting human rights around the world. 2018 also marks the 70th Anniversary of the Universal Declaration of Human Rights a milestone document in the history of human rights, as well as the 10th anniversary of The United Nations Guiding Principles on Business and Human Rights, which is becoming increasingly utilised amongst listed companies.
Benchmarking exercises that provide insight into the human rights disclosures of companies are also becoming increasingly common. These public benchmarks aim to encourage companies to engage in a ‘race to the top’ with regards to their human rights-related mechanisms and processes.
The Corporate Human Rights Benchmark (CHRB) launched its first public assessment of companies in March 2017. The CHRB is a multi-stakeholder initiative that benchmarks 98 of the largest global apparel, extractive and agricultural companies on their human rights disclosures. The CHRB methodology was developed through an extensive stakeholder consultation, and is mapped to international standards and norms, and in particular the United Nations Guiding Principles on Business and Human Rights.
Other benchmarking exercises such as KnowtheChain, Mining the Disclosures and Oxfam’s Behind the Brands and What She Makes campaigns are also rich public resources that provide insight into human rights related company disclosures.
An Australian Modern Slavery Act
In Australia, there have been movements within the government to implement a series of legislation that would crack down on forms of modern slavery – which includes debt bondage, human trafficking, forced labour, orphanage trafficking and other slavery-like practices which breach human rights – within Australia, and overseas.[i]
In February 2017, then Attorney General, Senator George Brandis, asked the Joint Standing Committee on Foreign Affairs, Defence and Trade to inquire into establishing a Modern Slavery Act in Australia. Many players in the responsible investment space in Australia made submissions to the inquiry.[ii] One of the final recommendations from the Committee was to establish supply chain reporting requirements for non-public sector companies – including both private and publicly listed companies – with over A$50 million revenue. The first components of the legislation, expected to be introduced into Parliament in June, will create an extensive amount of useful resources for investors to engage with.[iii]
Although there have been some demands in New Zealand to implement a Modern Slavery Act similar to that in the UK, there has not been any concrete government movements towards legislation. Mandatory reporting on modern slavery already exists however in California and the UK with many Australian and New Zealand companies already exposed.
The Impact on Investment
The expectations on investors as well as companies is set to increase in 2018. Investors will have to look at both their investments and their own internal practices, which includes everything from who cleans the office, to where office furniture is sourced. This is particularly the case for larger institutional investors who will have to report under the Modern Slavery Act once legislated.
Investors can expect an increase in human rights related screens incorporated into ESG due-diligence processes. For example, investments will be negatively screened for allegations of human rights abuses and where companies fail to adequately respond to such allegations. This also includes operations in human rights countries of concern where companies more easily slip under the radar of regulators and watchdogs. But there is also increasing attention to ensure portfolio companies implement best practice human rights policies, due diligence, grievance mechanisms and have adequate implementation and performance reporting.
Investors are also increasingly making use of information available on human rights disclosures to engage with companies on human rights issues. This is reflected in both, direct meetings with companies, and through an increasing number of shareholder resolutions lodged with a specific focus on human rights related issues.
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[i] It is important to note that Modern Slavery is not synonymous with Human Rights. Rather, Modern Slavery is contrary to a person’s human rights. Respecting human rights disables acts of Modern Slavery. For example, contractors who exploit workers through forced labour and debt bondage are committing a serious crime and a major violation of human rights.
[ii] RIAA, ACSI, Ausbil Investment Management, ACCR, the PRI, Global Reporting Initiative, Australian Ethical, Regnan, and the Thomson Reuters Foundation.
[iii] The Australian Government also established a Working Group in 2017 to create recommendations for a National Action Plan on Business and Human Rights. However, not all is progress. Following the publication of the Working Group’s recommendations the Government announced the decision to not go forward with the recommended National Action Plan.
Author: Nina Haysler
Research Project Manager