Investors and the decent work agenda

Anna Triponel

July 15, 2022
Our key takeaway: Investors have been scaling up their interest in labour rights issues, like health and safety, gender pay gaps, discrimination and forced labour in the supply chain. Now is the time for investors to capitalize on their forward momentum to push forward more efforts and progress on decent work in their investee companies, including freedom of association and collective bargaining, living wages, adequate benefits and social safety nets, and equal opportunity. These issues will only become more pressing in light of global trends towards a low-carbon economy, the rising automation of work, and a population that is both retiring from the work force and entering it at high rates. Investors should take action by considering the just transition as well as decent work factors in their own investment decisions, engaging with investees and policymakers on these issues, and pushing for more corporate disclosure on workers’ rights. 

The Principles for Responsible Investment (PRI), a UN-supported network of investors with a more than US$121 trillion collectively under management (as of 2021), released How Investors can Advance Decent Work (July 2022) to “clarify how institutional investors can contribute to the decent work agenda. This paper will define the concept of decent work, emphasising a human-centric approach towards workers and their rights, in line with various global standards and frameworks”:

  • Three transitions affecting the future of work: The paper highlights top trends that are likely to impact the future of decent work, identified by the ILO as “new forces that are transforming the world of work and creating immediate challenges.” First, the global transition to a low-carbon economy “if managed poorly, will likely exacerbate inequalities and result in stranded workers and communities. However, significant opportunities await investors if the transition is managed efficiently.” Investors have an opportunity to support a just transition. According to PRI, one example is: “investment and innovation” in renewable energy and environmentally friendly construction, which will entail job creation and re-skilling of workers. As another example, “Investing in the green economy can advance the decent and inclusive work agenda, because environmental degradation already disproportionately affects vulnerable populations and low-income countries.” Ultimately, inaction on a just transition is likely to expose investor portfolios to additional climate risks. Another trend is the trend towards automation, estimated to affect 30% of jobs by the mid-2030s. Investors should carefully consider their investments in the technological transition, “ensuring that dialogue between affected workers and managers is directed towards proactively shaping the design of future jobs.” In addition, the gig economy fuelled by digital platforms poses higher risks to workers, who are in precarious employment situations and often lack social safety nets. “To support the decent work agenda, it is important that the platforms (and their clients) respect safeguard expectations across the pillars of decent work. … This ought to be coupled with stronger regulation regarding the use of individual personal data and algorithmic accountability.” Finally, demographic changes—specifically the significant expansion of the 60-plus population and the youth population—will likely place pressure  on both the just transition and the technological transition. 
  • Four pillars of decent work: PRI has outlined core pillars of decent work, in alignment with international frameworks. PRI emphasises that these pillars will “need to be addressed by investors as part of driving systemic change.” The pillars include: (1) Workers’ voice & social dialogue (encompassing engagement with workers, freedom of association, collective bargaining, and the freedom to express concerns and grievances). (2) Living wage (encompassing regular and timely wage payments, no requirement for excessive hours, upward adjustments for the cost of living and individual advancements, and sufficient to enable savings for long-term needs). (3) Access to benefits, health and safety & social protection (encompassing occupational health and safety and beyond, benefits like healthcare and paid time off, future benefits like pensions, and a social safety net). (4) Equal opportunity and treatment (encompassing personal development opportunities like education, training and advancement, and social integration, i.e., collective significance of work that provides network of connections and interactions that forge social cohesion). 
  • Key areas for investor action: PRI highlights top areas for investor action. First, investors should consider decent work implications in their investment decisions. According to PRI, “[f]actoring decent work considerations into investment decisions is still nascent, and investors have so far tended to engage with listed companies on only a subset of decent work-related issues,” with the exception of some private market investors and investments in thematic bonds, like SDG-linked bonds. Second, investor should conduct stewardship with investees through “meaningful engagement with corporates, policy makers and other stakeholders, as well as voting on shareholder resolutions.” Engagement should go beyond traditional ’S’ factors like occupational health and safety, supply chain and the gender pay gap to include forward-looking issues like collective bargaining and living wage. Third, investors should engage with policymakers regularly and on issues that focus on all four pillars of decent work outlined by PRI. PRI notes that “[t]his work can support including decent work factors in human rights due diligence legislation.” Fourth, investors should urge companies to disclose more—and better—data on their decent work efforts. This should go beyond “success stories” to include “a transparent and comprehensive overview of the impacts that the company has on workers in direct operations and across value chains." 

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