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The UN Guiding Principles Reporting Framework Means No Excuses for Companies on Human Rights Performance

Posted by Lauren Compere, Managing Director at Boston Common Asset Management, LLC at Apr 01, 2015 12:00 AM |
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In February Boston Common Asset Management spearheaded a group of over 60 investors from around the world – including many Ceres Coalition investor members - with $3.9 trillion of assets under management, in a joint investor statement backing the new United Nations Guiding Principles (UNGP) Reporting Framework.

Submitted by Lauren Compere, Managing Director at Boston Common Asset Management, LLC

In February Boston Common Asset Management spearheaded a group of over 60 investors from around the world – including many Ceres Coalition investor members - with $3.9 trillion of assets under management, in a joint investor statement backing the new United Nations Guiding Principles (UNGP) Reporting Framework. The Framework is based on the UN Guiding Principles on Business and Human Rights (UNGP) and therefore focuses on how companies meet the “corporate responsibility to respect human rights.” It is important to stress that this responsibility goes beyond compliance with local, national, and international laws and regulations. It focuses on a company’s human rights risks and impacts rather than activities that a company undertakes to advocate or promote human rights. This new framework comes alongside the launch of a benchmark analyzing the human rights performance of 500 companies[1] and new interactive platforms on the issue[2].

Why should investors care about human rights? There is increasing evidence that mismanagement of human rights risks leads to real value destruction. One example from the extractives sector was the 30 percent share price decline at South African platinum producer Lonmin a week after 34 mineworkers were shot dead at its Marikana mine in 2012. Further, in a report cited by John Ruggie, a major oil and gas company estimates it experienced a $6.5 billion “value erosion” over a two-year period from non-technical risks such as human rights-related issues[3]. Another reason to care is increasing regulation from around the world from the 2010 Dodd Frank Act that focused on conflict minerals to the EU Directive on the disclosure of non-financial information that will require thousands of companies to release information on their human rights performance.

Beyond regulation and risk management, investors themselves face real reputational damage, if they are not perceived to have robust risk management and due diligence procedures in relation to assessing investee company risks related to human rights. In 2013 two European investors faced censure by the OECD when perceived to have applied insufficient human rights due diligence over their investments in South Korean steel company POSCO - even though both were only minority small shareholders with relatively small stakes in the company.

The UNGP Reporting Framework helps companies to “know and show” their management of human rights risks and is a tool that enables companies to assess, manage and disclose their human rights performance in line with global standards. The framework has already been adopted by companies including Unilever - the first adopter - plus Ericsson, H&M, Nestlé and Newmont. It supports rather than duplicates other non-financial reporting with substantive cross-references to the Global Reporting Initiative (GRI), UN Global Compact, and the FTSE for Good and Dow Jones Sustainability Index metrics.

In the coming months, the investor statement will be open to new signatories and will be used to encourage companies to adopt the reporting framework that are in high risk sectors such as apparel, extractives, and information and communications technologies.

NOTE: The information in this article should not be considered a recommendation to buy or sell any security. All investments involve risk, including the risk of losing principal.

[1] See: CHRB

[2] See: Business and Human Rights Resource Centre

[3] http://www.reports-and-materials.org/sites/default/files/reports-and-materials/Ruggie-report-2010.pdf

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Meet the Expert

Andrew Logan

Since joining Ceres in 2002, Andrew has launched and directs two program areas for the organization. The first focuses on working with investors to engage the oil sector on key sustainability issues including climate change, biodiversity and water. Andrew's second area of focus is the insurance sector, particularly the role that insurers could play in encouraging solutions to climate change.

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