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As outlined in our recent paper, investors themselves have responsibilities under the UN Guiding Principles and under the OECD’s Guidelines for Multinational Enterprises. In 2013, the UN Office of the High Commissioner for Human Rights (OHCHR) specifically clarified that the UNGPs apply to institutional investors and in 2017, the OECD published technical guidance on how institutional investors should comply with the Guidelines for Multinational Enterprises.
Human rights encompass a range of social issues which are both urgent and systemic in nature. These issues, from inequality and discrimination to inequitable access to healthcare, undermine not just individual rights but also the societal infrastructure which the global economy relies on for delivering long term growth and prosperity.
Looked at from a different angle, the widespread adoption of human rights has the potential to provide a significant opportunity for increased global prosperity. Such prosperity flows through to the portfolios of investors and their beneficiaries through overall market returns (‘beta’), and to beneficiaries directly through the improved standards of living achieved through improved respect for human rights.
Progress on human rights – like other outcomes that investors may seek to make progress on through stewardship – suffers from a collective action problem, in that everyone (including investors and companies) benefits from the actions of those who put in effort to solve the issues, but may be unwilling to contribute to those efforts. In addition to collective action problem benefits, a collaborative stewardship initiative has the potential to enhance investors’ influence by strengthening their common voice; that is, making clear their commonly held expectations of companies and other stakeholders, then using a variety of tools of influence to encourage corporate alignment with those expectations.
The objective of the initiative is to advance human rights and positive outcomes for people through investor stewardship.
The primary efforts of the initiative are delivered through engagement with companies in collaboration with other investors. However, recognising that addressing human rights will require a variety of stewardship tools and activities, the PRI will support a range of these activities, such as engagement at shareholder meetings and public policy engagement.
It is widely recognised that striving for global respect for human rights is complex and will require varied approaches across different businesses, regions, and sectors. However, at a high-level, three key expectations have been set for the focus companies:
The PRI will publish annual progress reports to provide investors and other stakeholders with a regular update on the progress of the initiative against its stated objective.
This progress report will be based on the initiative’s assessment framework* and reports from investor participants on the progress of their engagements with focus companies and their own level of participation within the initiative.
*In 2023, the PRI will publish the Advance assessment framework methodology, which will be used as the basis to measure progress of the engagement focus companies against the company expectations; and progress of the overall initiative against the objective. This methodology will rely on existing benchmarks and there are no plans to develop an Advance benchmark at this stage. This assessment framework is still underdevelopment, with the support and input from the initiative’s signatory advisory committee and technical advisory group.