Our key takeaway: Institutional investors, including asset owners and asset managers, have a responsibility under the UNGPs to respect all human rights, including fundamental labour rights set out by the ILO. Investors are expected to address potential risks and actual negative impacts on workers that they could be connected to through their portfolios and investment decisions. This responsibility takes on extra weight for pension funds and their asset managers, who are tasked with upholding the long-term interests of their beneficiaries—workers. Asset owners should hold managers to account for their commitment to respect human rights, across several categories of action that promote workers’ rights: rights-respecting stewardship frameworks, responsible stewardship practices in public equities and in private market assets, and advocacy for public policies that empower workers and give them a voice.
The Global Unions' Committee on Workers' Capital (CWC), a joint initiative of the International Trade Union Confederation (ITUC), the Global Union Federations (GUFs), and the Trade Union Advisory Committee to the OECD (TUAC), developed Baseline Expectations for Asset Managers on Fundamental Labour Rights (July 2022):
- Investor responsibilities towards fundamental labour rights: Fundamental labour rights refer to the five core rights outlined in the ILO Declaration on Fundamental Principles and Rights at Work: the elimination of forced or compulsory labour, the abolition of child labour, a safe and healthy working environment, the elimination of discrimination in respect of employment, occupation and freedom of association, and the effective recognition of the right to collective bargaining. Under the UN Guiding Principles on Business and Human Rights, institutional investors have a responsibility to respect human rights including by preventing, addressing and remediating adverse impacts of their investments on people. This is echoed by the OECD Guidelines for Multinational Enterprises, which calls on investors to use their leverage as shareholders to address adverse human rights impacts across their full investment portfolio, regardless of asset class.
- Expectations for investors: The guide outlines four categories of expectations, with specific guidance ranging along a spectrum from baseline expectations to good practices. CWC emphasises that these expectations span different funds, asset classes and geographies and that they should be seen as “additive”—leading managers will go beyond baseline expectations to implement all actions along the spectrum. The categories and expectations: (1) Stewardship framework: “An asset manager’s stewardship framework should be aligned with international human rights norms, standards and frameworks. It should acknowledge responsibilities under the OECD Guidelines for MNEs and be informed by trade union input.” (2) Stewardship practices in public equities: “An asset manager should use its leverage, through engagement, proxy voting and investor collaboration, to ensure that investee companies act in good faith when workers attempt to exercise their rights to freedom of association and collective bargaining.” (3) Stewardship practices in private market assets (real estate, infrastructure and private equity): “An asset manager should ensure that fundamental labour rights are respected in its private market investments, including by companies contracted to manage or operate assets, in accordance with the ILO Declaration on Fundamental Principles and Rights at Work and asset manager responsibilities under the OECD Guidelines for MNEs.” (4) Policy advocacy: “An asset manager should align its responses to consultations by governments, regulators, initiatives and reporting bodies with fundamental labour rights and core labour issues.”
- How investors can leverage this guidance: Both asset owners and asset managers have an expectation to address negative human rights impacts they may be involved with, through their portfolios and their investment decisions. CWC advises asset owners like pension fund trustees and staff to “[s]hare this document with contracted asset manager (e.g., client relationship manager) and ask managers to report back to them on the implementation of the CWC Baseline Expectations and provide a timeframe for improvements.” For asset managers, the CWC guidance can be used to evaluate an institutional investment stewardship framework, “including your stewardship policies and practices across asset classes and your approach to policy advocacy. The document can also be used as a road map for continual improvement of your firm’s approach to fundamental labour rights.”