The Principles for Responsible Investment has announced the largest collaborative initiative on social issues and human rights, involving more than 220 institutional investors representing over US$30 trillion in assets under management.
Launched last week at the PRI’s annual investor conference in Barcelona, the Advance initiative will involve active engagement between 120 of those investors and 40 initial focus companies within the mining and metals and renewable energy sectors.
Advance signals the fast-changing dynamic within environmental, social and governance (ESG) investing, wherein there is an urgency towards ensuring that social factors move closer to the top of priorities, which have tended to favour the “E” within the ESG spectrum; and the pressing need for ESG-focused investors to engage actively with corporations transparently to the benefit of stakeholders.
Indeed, Advance marks the first time that engagement transparency has manifested on such a scale: the list of investors and the companies involved in the first phase of the stewardship initiative has been published, whereas hitherto, active engagement reporting has been patchy and sporadic.
These include mining giant Anglo American with lead investors Schroders and Morgan Stanley Investment Management, steel heavyweights Posco (lead investors EOS at Federated Hermes and JPMorgan Asset Management) and Nippon Steel (lead investors Nomura Asset Management and Man Group), as well as Denmark’s renewable energy industry leader Orsted and lead investors Boston Common Asset Management and Storebrand.
Each of the 220 investors have jointly signed a public statement recognizing the urgency of human rights issues and their systemic nature as well as their status as a societal asset underpinning investment returns and global prosperity.
“Investors’ collective efforts can truly bring about change in the way corporate practices impact people,” said PRI chief executive officer David Atkin at the launch of Advance in Barcelona.
“Through Advance, we aim to offer investors the opportunity to shape the way forward through more ambitious stewardship and accelerate action on human rights and social issues. From tackling global inequalities to preventing damage to the environment which can impact the health of people for generations, we hope Advance will drive positive outcomes for workers, communities and society at large; supporting investors in fulfilling their own responsibility to respect human rights; and helping the industry manage risks to overall investment returns.”
At the same time as participating in the initiative, the investors involved have agreed to “walk-the-talk” by developing their own human rights policy and an attendant human rights due diligence process which – if they don’t already have them – will be ready within one year of joining the initiative.
The PRI aims to facilitate direct engagement between investors and affected stakeholders as well as to coordinate the effort with existing investor initiatives based on the same objective as Advance, such as the Investor Alliance for Human Rights, to avoid duplication of efforts and enhance the drive’s effectiveness through collaboration.
Commenting on Advance, Nomura’s chief investment officer for equities Yuichi Morao says: “Nomura Asset Management recognizes human rights as an ESG topic of particularly high importance. In our stewardship activities, we seek to gain a precise understanding of the human rights initiatives that companies within our portfolios are pursuing and engage in dialogue to encourage those companies to properly manage human rights risks. As a member of the initiative’s advisory committee, Nomura Asset Management will play a leading role in collaborative engagement with other investors and maximize our contributions to addressing issues related to human rights.”
A clear locus in which Advance could prove to be a game changer is project finance, wherein one of the greatest challenges for large-scale energy projects is land acquisition and use and is a sector in which the societal impact of projects and the rights – the human rights – of local communities have more often than not been ignored and subsumed by the commercial imperative.
ESG-focused investors are increasingly waking up to this inequity amid the wave of renewable energy projects being developed globally, hence the timeliness of Advance’s launch.
A high-profile example is the threat by Norway’s Storebrand to divest its holding in Eolus which has developed the country’s Oyfjellet wind farm and which sits on the land of the indigenous Sami community. Storebrand will dispose of its holding should the developer not consult the community on the project.