As a business entity PGGM has a responsibility to respect human rights. We have embraced this responsibility and integrated it in our investment process along with the other ESG issues. However the publication of the OECD Guidelines for Institutional Investors and the UN Guiding Principles for Business and Human Rights before them, have further clarified the expectations.
At PGGM we try to respond to one of the aspirational goals of our largest client PFZW, known as a ‘better pension in a better world’. The primary responsibility of a pension fund is to provide for good pensions now and for generations to come. On top of that it is a great challenge for our investment managers to focus not only on good returns but also balancing these with a positive impact on the world.
Prevent and manage risks…
At our investee companies there can be many legal, operational and reputational risks hiding in unmanaged negative impacts to human rights. For instance, employees and communities are nowadays more empowered by emerging and strengthening regulation to seek justice, it may provoke investigations, hostile shareholder resolutions and legal claims.
Abusive labor practices can lead to difficulties in retaining and recruiting good quality people, project implementation delays, and a loss of the license to operate. Finally negative press can lead to loss of customers, to public protest and the loss of brand value, etc. We believe that a proper implementation of the UN Guiding Principles of Business and Human Rights can help reduce those risks.
A good starting point for investors towards better respect for human rights is to formalize a separate Human Rights policy. The process of creating such a policy and the introduction of the policy to the various departments around PGGM, helped us tell the story and to raise further awareness of the different reasons for bringing the human rights lens in the investment process.
We are also working towards organizing a training with an experienced external organization and will continue developing internal training materials. With the process of the IMVO covenant for the pension sector, part of the Dutch governments’ responsibility to protect human rights, many of the questions regarding human rights and especially labor rights will become even more relevant for both pension funds and their asset managers.
… and seek opportunities
The brighter side of human rights and labor risks is the opportunities side – when these and also other ESG issues are managed well. We already see examples in companies that contribute to economic growth by providing for living wages, which makes a positive impact on SDG 8 (decent work and economic growth) and SDG 10 (reduced inequalities).
Or by investing in monitoring, auditing and complaints systems throughout their supply chains, businesses can contribute to ending forced labor in all its forms (SDG 8) but also strengthen whistleblower protection to ensure greater access to justice (SDG 16). So not only by investing in solutions can we have a positive impact on the world but also by encouraging the companies we invest in to understand and manage the negative impacts they can potentially have on the environment and society.