Signatory organisation type: Investment manager
Region of operation: Netherlands
Assets under management: EUR 175 bn
As an investment manager for pension funds, we look to create long-term value for our clients and their beneficiaries and consider stewardship as central to realising this.
Living wages1 is one of the topics that our clients highly value.
We are one of the founders and a member of the management committee of the Platform Living Wage Financials (PLWF), an alliance of 18 financial institutions (banks, insurers, pension fund asset managers and asset managers) representing over EUR€4.6 trillion in assets under management. It was founded in September 2018 and uses its financial leverage to engage investee companies to address the non-payment of a living wage to workers in their global supply chains.
Why we are tackling living wage
PLWF members recognise the systemic issue of underpayment in supply chains. And we know that being able to earn a living wage is instrumental for a broader range of human and labour issues. For instance, living wages can lift workers out of poverty and promote decent standards of living, while mitigating the risk of excessive overtime and child labour and reducing inequalities. A living wage can therefore act as a catalyst to achieving the UN’s Sustainable Development Goals, in particular, Goal 1: no poverty, and Goal 8: decent work and economic growth.
By 2018, we had already incorporated social criteria into our ESG screening and were involved in several thematic engagements on social matters. However, we wanted to expand our work in the social domain. We found the issue of a living wage to be a key topic to do so, which is why we decided to focus on this and use our collective leverage to boost the protection of fundamental human and labour rights.
As recognised by, among others, the International Labour Organisation (ILO) and the OECD, a living wage is a fundamental human right. In this way, we also honour our commitment to the United Nations Guiding Principles (UNGPs) and the OECD Guidelines for Multinational Enterprises.
What we are doing
Under the umbrella of the PLWF, financial institutions come together to encourage and monitor investee companies to accelerate the payment of living wages and incomes in their global supply chains. We seek to have a real impact and look for meaningful engagement.
Collaboration can have significant positive effects. It means we can allocate our resources more efficiently by sharing our workload and expertise, as well as exercise more leverage to effectively influence investee companies to move forward. We also hear that the investee companies welcome such a harmonised approach as that enables them to talk to us simultaneously.
We cannot expect individual companies to solve a systemic issue on their own. This is precisely why our strategy is to address entire sectors, rather than individual companies. We have focused on more than 50 companies across three sectors to date: garment and footwear; food production; and food retail. We decided to focus on these sectors because wages are often two to three times lower than living wage estimates.
To ensure an effective working relationship between the different platform members , we created a management committee, three sector-specific working groups, an AGM working group and a working group based on engaging with external managers.
This governance structure provides:
- clarity on each member’s specific role(s);
- assistance in setting concrete objectives for the future; and
- effective coordination of engagement and reporting.
We find it important to educate ourselves on the topic, so that we are well equipped to have constructive dialogues, truly understand underlying challenges and guide companies where needed. We regularly invite external experts to our platform meetings and sector-specific working group meetings to update us on their work, sector developments and so on. In addition, we have active relationships with a group of ‘Friends of the Platform’ consisting of industry experts, such as relevant multi- stakeholder initiatives, NGOs and other stakeholders working on the topic. They inform our strategies and we consult them to determine focus areas.
Where dialogue with companies is insufficient, we believe it is important to take more assertive steps to achieve our objectives. We have asked questions during company AGMs or addressed escalation letters to company boards. We are looking into how we can increase our leverage further by, for example, encouraging the use of escalation mechanisms such as voting against management or filing shareholder proposals.
We also aim to have an impact in several other ways:
Engaging external asset managers
Not all PLWF members’ assets are managed directly: we also use external asset managers. Therefore, we aim for external asset managers to address the topic via a separate working group that holds regular calls. The PLWF uses its joint leverage to encourage the managers to consider the issue in their investment activities and engagement with investee companies. Where desired, the PLWF provides external managers with information . By doing so, the PLWF members aim to maximise their impact.
To drive sector-wide change, we benchmark companies and motivate ‘laggards’ to follow their better-performing peers .
We assess company performance against a robust living wage assessment methodology, which was developed by the members of the platform in consultation with industry experts. It is aligned with the Reporting Framework of the UNGPs . Large parts of our assessments also received external scrutiny by UK accounting firm Mazars to preserve the high quality of its assessments.
To support investors to engage with companies, assessment results are publicly available and published in an annual report, which also highlights best practices that should promote sector-wide improvements.
Using the above assessment methodology, we annually review investee companies’ performance on promoting living wages.
In the three years the project has been up and running, there have already been tangible improvements to companies we have engaged with. For example:
- German company Puma successfully collaborated with management and workers of a Vietnamese garment factory to increase wages for factory workers.
- Food giant Unilever has committed to realising living wages and incomes for everyone directly providing goods and services to them.
- US clothing company Hanesbrands announced that it would amend its Global Standards for Suppliers to recognise the right of supply chain workers to fair compensation and that the company would work with its suppliers to realise it.
- The Netherlands’ biggest supermarket chain, Albert Heijn, published an extensive due diligence document that includes a commitment to advance the payment of a living wage/income.
- Brazil’s biggest clothing department store, Lojas Renner, has included living wage in its policy.
- American clothing company VF Corp published their first human rights report that includes thorough reflections on and a strong commitment to enabling living wages.
- Swedish clothing company Hennes & Mauritz engaged with experts to measure the impact of their strategies and interventions to promote living wages and used the findings to refocus its efforts.
- Chocolate company Hershey published a position paper on living wages and living incomes.
- A growing number of companies have joined collaborations that help them to measure living wage or living income gaps in supply chains. For example, an increasing number of garment brands are using the wage data collection tool that was developed by the Fair Labor Association, and food companies have partnered with sustainable trade initiative IDH to measure household income.
We believe that awareness and company-wide commitment are crucial starting points for driving positive impact. According to an impact study that was conducted earlier this year2, the PLWF’s work does indeed drive positive change.
In 2021, PLWF published its first annual report, which presents the results of the 54 living wage and living income assessments that it has conducted for investee companies.
Call for case studies
We are seeking case study submissions from asset owners, investment managers and service providers that showcase an activity or practice that is aligned to Active Ownership 2.0. For more information, visit our website.
Active Ownership 2.0 is a framework for the more ambitious stewardship needed to deliver against beneficiaries’ interests and improve the sustainability and resilience of the financial system. Under this framework, investors use their influence to shape sustainability outcomes by engaging in more effective and assertive stewardship activities.
1 We use the term ‘living wage’. However, this also refers to the broader definition of ‘living income’ for the agriculture and food companies
2 Alofs, L. (2021). Talking About a Living Wage: Enhancing Shareholder Salience for the Implementation of a Living Wage (Master Thesis). Erasmus University Rotterdam