Moving the laggards, the middle and the leaders
Rooted in a risk-based approach, investors tend to focus on portfolio companies that have a poor human rights approach and performance. However, it was highlighted in engagement dialogues that investors should consult not only with laggards but also the leaders. This can help ensure that senior management understand the importance of the topic for investors and make sure it does not slip off the radar if the company is assumed to be quite mature. As the findings demonstrate, even the mature and leading companies in the group need to improve their approach to and implementation of the UN Guiding Principles.
Better traction with closer proximity
Investors highlighted that having a lead investor closer to where the company is headquartered or have their key operations is beneficial. This also enabled more in-person meetings than phone calls, which in turn may have helped build a stronger relationship between investors and companies. This is reflected in a recent academic study7 which highlighted that success rates were enhanced when the investor is headquartered in the same region as the target firm. Supporting investors also play a crucial role as they can help influence and leverage because of their scale, ownership and geographic breadth.
Connecting with the relevant people and commitment from the top
Investors highlighted it is crucial to speak to company representatives that are sustainabilityminded in order to raise awareness of investor expectations on the topic. Unsuccessful dialogues were often because of the fact that target companies had consistently failed to put investors in touch with the relevant people within the organisation.
In cases where companies did not have a real commitment from the top, it was difficult for investors to motivate companies to deliver on engagement asks and move towards the expected improvements requested by investors. However, where investors had direct access to C-suite level representatives, the engagement dialogues were often more impactful.
Company collaboration through multi-stakeholder initiatives
Active participation in and dialogue around complex issues such as those addressed in this engagement is intrinsically beneficial to participants given that companies are often exposed to the same type of risks. Actively participating in human rights working groups led by industry associations such as IPIECA and ICMM allow companies to engage with peers and benefit from knowledge sharing platforms. Companies may learn from leading companies’ best practices and potentially showcase their own. Investors emphasised the value of this as it can take the spotlight off individual companies and may contribute to company engagement dialogue by demonstrating industry momentum.
It all drills down to company culture
Company culture is key to managing and responding to human rights risks effectively. Where a company can show it can respond adequately and in a timely way and provide remediation where relevant and learn from mistakes, it can help inform investors about the potential and actual human rights risks to consider in their processes and due diligence, selection of portfolio companies and ongoing monitoring and reporting.
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