In recent years, the role of financial actors in contributing to and preventing corporate harms to workers, communities, and other stakeholders has come under scrutiny. Yet, to outsiders, how human rights figures into investment decisions remains as obscure as the processes behind complex investments. Without a deep knowledge of the investment process, it is difficult for human rights advocates to effectively engage with investors, put pressure on them to improve or divest from projects with negative human rights impacts, and help them proactively identify human rights risks. Focusing primarily on pension funds and their infrastructure investments, this research aims to illuminate the extent to which fund managers integrate human rights considerations into their investment decisions. It is intended as a starting point for human rights advocates who seek to engage more effectively with pension fund managers to strengthen responsible investment practices.
For this research, we contacted twenty pension fund and asset managers. Among the twenty, eleven managers at eleven funds in eight countries, including an oversight body, agreed to an interview.
Key findings:
- ESG managers of pension funds typically have some knowledge about international human rights standards, yet this knowledge is not mainstreamed throughout the organization.
- Gaps remain in existing risk assessment and monitoring procedures within institutions, and industry-wide best practices are only beginning to emerge.
- Responsible investment teams are often challenged by insufficient capacity. They would benefit from an expanded team that is knowledgeable about human rights risks and able to conduct in-depth monitoring and assessment of the human rights implications of fund investments.
- Pension funds usually engage with investee companies when there are major or systematic human rights concerns, as opposed to isolated incidents, and will consider divestment only when investee companies refuse to engage.
- Investment managers recognize that good information is a key challenge, and many are open to improved communication channels with NGOs.
The publication can be accessed at the website of the Institute for the Study of Human Rights.
Photo by Zhipeng Ya on Unsplash
