As investors, we recognize the impact of human rights issues on our investments and the role we play in driving progress. As well as the argument for social justice, there is a strong investment case for promoting human rights. That’s why assessing the risks and opportunities of human rights issues has been a core part of our environmental, social and governance (ESG) approach for years.
The paper our approach to human rights in investments explains our approach in detail. We summarize the main points below.
Four core beliefs underpin our human rights investment approach.
- As a core part of our investment process, we consider human rights risks and opportunities, while also seeking good outcomes for our clients.
- As active investors, fulfilling our human rights responsibilities requires ongoing engagement and effort to drive positive change.
- Upholding human rights often relies on voluntary agreements and weak regulation. This is inadequate — we need stricter regulation and improved corporate practices.
- Human rights challenges are often complex and persistent. Meaningful, lasting change requires a multi-stakeholder approach that includes businesses, investors, governments, civil society and academia.
At Aberdeen Standard Investments (ASI), we support the United Nations (UN) "Protect, Respect, Remedy" framework. We use the UN Guiding Principles for Businesses and Human Rights (UNGPs) to understand our responsibilities, and to assess human rights issues in our investments.
Our focus on human rights gives us valuable insights into trends, risks and opportunities. These findings can help inform our decision-making.
Our focus on human rights gives us valuable insights into trends, risks and opportunities. These findings can help inform our decision-making. Our aim is to deliver positive outcomes for our clients, while also upholding and promoting human rights values.
As active investors, high-quality research is a core part of our investment process. This includes human rights research, undertaken by investment analysts and portfolio managers across asset classes. We also have a dedicated human rights analyst within the ESG investment team. This specialist provides insights on key regulatory and industry trends across regions, and carries out research on specific human rights risks and opportunities. This is done in collaboration with the ASI Research Institute.
We look at human rights from both a top-down and bottom-up perspective, focusing on high-risk areas.
- Top-down assessment – we draw on political and social research to understand the human rights environment in a given country or region, and how that affects our investments. Using proprietary ESG frameworks and indices, we seek to identify key rights at risk.
- Bottom-up assessments – different companies face different human rights issues, depending on their activities. For instance, land rights and community consent are more relevant for a mining firm, while the right to privacy would be more relevant for a technology software company.
There are many financial incentives for respecting human rights. For companies, these include the following.
- A strong corporate reputation can boost investor confidence, strengthen business partnerships, increase customer loyalty and help attract and retain skilled staff.
- A robust human rights approach allows companies to operate more efficiently and effectively – particularly in complex or unfamiliar environments, or areas of conflict.
- Regulators are increasingly calling for mandatory reporting and due diligence on human rights. Companies that can demonstrate a robust approach will avoid penalties.
At country level, a lack of commitment to human rights — or participation in abuse — can fuel social unrest, which can damage or disrupt the economy. This may force governments to increase borrowing to cover budget deficits. In addition, if multinational companies deem a country a less suitable place to invest because of human rights issues, this can materially affect cross-border capital flows. This is important to our own assessment of whether a country can continue relying on these investment inflows to support its economy.
Engagement and voting
Regular engagement with companies and issuers is essential to understand the management of human rights risks and opportunities. It allows us to gain insights and to communicate our expectations to stakeholders. With our equity investments, we also exercise our influence by voting at shareholder meetings. We expect all companies in which we invest to:
- continually work to understand their actual and potential effects on human rights
- establish systems that actively ensure respect for human rights
- take appropriate action to remedy any human rights infringements.
We expect governments and policymakers to work to uphold human rights, and we encourage them to provide better protections for workers. We do this through ongoing engagement with issuers, and through our collaborative initiatives and policy advocacy activities.
Using our leverage in this way is a powerful tool. Through active engagement and dialogue, we can help guide companies toward best practices in order to address human rights issues. Where firms are unwilling to engage or we see insufficient progress, we will look for ways to increase our leverage, such as joining collaborative industry groups. As a last resort, we will consider selling our holdings.
The rights-holder’s perspective
To understand human rights issues fully, we must consider the perspective of the people affected (or likely to be affected) adversely — the rights-holders. We rarely have access to these individuals and so we look to representative organizations for insights. These can include the UN and its Special Rapporteurs, non-governmental organisations, international development agencies, trade unions and non-profit organisations. These groups publish research on human rights and sometimes contact us for discussion. We appreciate their work as it enhances our own research efforts and often provides recommendations we can take to our investee companies and issuers.
Our ESG disclosures
At ASI, we support the UN Guiding Principles Reporting Framework and encourage companies to disclose in line with its guidance. Our voting records can also be found on our website, including how we voted on every resolution for every company, as well as details of our voting policies.
Our approach document is an important part of our disclosure on human rights. We will be updating this regularly to reflect our progress and activities.
Foreign securities are more volatile, harder to price and less liquid than U.S. securities. They are subject to different accounting and regulatory standards, and political and economic risks. These risks are enhanced in emerging markets countries.