PGGM and Shift join forces to strengthen respect for human rights

10 December is International Human Rights Day, pension investor PGGM and the human rights expertise center Shift¹ are pleased to share that we are embarking on a new partnership to strengthen PGGM’s role and capabilities to take effective actions in safeguarding human rights.

Our blueprint for carrying forward this work is the UN Guiding Principles on Business and Human Rights (UNGPs) which were launched nearly 12 years ago and set the authoritative global standard for companies’ responsibilities with regard to impacts on people connected with their business.

The Covid-19 pandemic has brought business practices that result in harm to people into sharper focus: for example, we have seen mass lay-offs of garment workers without severance pay,² and extreme health and safety risks borne by workers in warehouse and delivery roles.³ Moreover, in the midst of climate change and biodiversity loss, environmental risks disproportionately threaten the most vulnerable, for instance affecting food production.

The companies PGGM invests in face these and other human rights challenges. As we seek to understand their risks and opportunities alongside our own obligations to respect human rights, we are asking ourselves, can we do more?

Looking beyond human rights policies
For two years now, PGGM has applied a screening aligned with OECD key considerations, which, among other topics, identifies severe human rights violations based on incidents in business operations and supply chains. When engaging with the companies involved in these incidents, we often see that a sound human rights policy does not necessarily signal robust implementation and desirable outcomes. In other words, we need to dig deeper into how companies identify and assess risks to people from business activities up and down the value chains, and the actions they take to prevent or mitigate those potential harms.  

This sort of analysis is familiar to investors who have grappled with climate change engagement, which evolved from examination of corporate aspirations to better measures of greenhouse gas emissions and plans for reaching targeted reductions. But social metrics and indicators are a bit more of a wilderness. We see a tendency for companies to measure inputs and activities aimed at human rights without connecting those measures to actual outcomes for people. So far, investors seem to reach more consensus on process-oriented metrics (policy, monitoring and reporting procedures) than on operational, outcome-based practices and metrics. PGGM and Shift look forward to exploring business practices related to land and labor rights issues and how indicators can connect actions with outcomes.

Furthermore, newly-released research from PRI, which Shift contributed to, reveals a tendency for investors to focus on specific and limited topics like modern slavery and diversity. We think investors first need an overarching view of corporate approaches to managing their impacts on people, which can then be applied to specific salient issues of concern.

Challenges and opportunities in the supply chain
Due to the complexity and lack of transparency of global supply chains, conducting quality human rights due diligence can be a challenge. Practices affecting people’s human rights typically become opaque as we get deeper into the supply chain. Recent legislative developments, such as the EU Corporate Sustainability Due Diligence Directive (CSDDD), together with the advent of the EU Sustainability Reporting Standards, will help motivate more companies to tackle these challenges. This should also provide investors with greater insights with which to ensure meaningful changes in how companies address adverse impact on people.

Investors like PGGM can use their leverage to enable better human rights outcomes, including in companies’ value chains. For example, when engaging with footwear brands, do we sufficiently understand the practical challenges faced by their suppliers? When both sides exist in a portfolio, PGGM has the opportunity to gain valuable insights and engage with both. We believe this approach is worth exploring in the field of human rights.

Just transition
On the subject of climate change, there is a growing focus among investors on the impacts on people of both climate change itself and, too often, of the strategies that companies adopt to mitigate and adapt to climate risk. Recent guidance published by the Business and Human Rights Resources Centre shows that human rights violations are prevalent in the development of renewable projects, especially regarding indigenous people and their land-related human rights. We therefore welcome the fact that the new stewardship initiative, Advance, launched by Principles for Responsible Investment (PRI) will focus initially on the metals and mining sector and renewables sector, given their strong connections with just transition issues.⁴  

As we observe International Human Rights Day, and as we look ahead to the 75th anniversary of the Universal Declaration of Human Rights in 2023, PGGM and Shift look forward to collaborating to explore how investors can lead the way in applying their knowledge, commitment, and leverage to address the most severe impacts on people related to their investments.

1. Shift is a not-for-profit mission-oriented organization focused on helping business get done with respect for people's dignity. As the leading center of expertise on the UN Guiding Principles on Business and Human Rights, Shift works with businesses, financial institutions, investors, standard-setters, and policymakers to embed respect for rights. Bob Dannhauser, CFA, is a senior advisor with Shift focused on working with investors to address risks to people associated with their investment activities.
2. How does Covid-19 affect women garment workers? – Fair Wear
3. COVID-19 Risks to Warehouse Workers | School of Public Health | University of Illinois Chicago (uic.edu)
4. PGGM is a collaborating investor in this initiative, and Shift is a member of the Technical Advisory Group.