Investors back human rights efforts ahead of EU rules

October 15, 2021

A group of 94 investors with more than $6 trillion in assets have announced support for human rights and environmental due diligence ahead of new rules expected from the EU and recent support from the UN.

The Investor Alliance for Human Rights, a global coalition of investors backing the UN’s Guiding Principles for Business and Human Rights, issued a statement in anticipation of a legislative proposal from the European Commission on Sustainable Corporate Governance. 

The commission's statement is expected to require companies to account for their human rights and environmental impacts or face legal and administrative consequences.

Currently, only a minority of companies have demonstrated a commitment to take human rights seriously, research suggests. A 2020 ranking by the Corporate Human Rights Benchmark found that nearly half of the 230 largest publicly traded companies in high-risk sectors received a score of zero when measured against five due diligence indicators.

Rebecca DeWinter-Schmitt, associate director of the Investor Alliance for Human Rights, said: "As more and more investors scrutinise the impacts of their investments on people and planet, the investor case for mandated human rights and environmental due diligence is undeniable." 

She added that “robust” and “enforceable due diligence” would allow for risk identification and mitigation.

“It will create a level playing field with consistent expectations of companies and investors, establish clear lines of responsibility and accountability, encourage much-needed transparency, and promote engagement with affected stakeholders,” said DeWinter-Schmitt. 

The alliance's statement also highlights gaps in current legislation and emphasises the responsibilities of small and medium-sized businesses as well as large companies, ensuring supply chains are monitored in full. 

The Investor Alliance for Human Rights has also recommended that the EU's proposal be aligned with international frameworks.

Heidi Hautala, chair of the European Parliament’s Responsible Business Conduct Working Group, said: "Systemic challenges need systemic solutions. One company may not change the world alone, but when sustainability is brought into the core of the private sector, this has the power to change the world. This truly is a Brussels moment. The EU is in a position to lead the way and to create a global standard for sustainable business."