Retrospective: Social and Labour Rights in investment policies
Watch the videos of our second thematic event held on 17 December 2024, in Brussels.
On December 17, Towards Sustainability hosted a thematic day in Brussels focusing on social and human rights in sustainable investing. Social rights have been a cornerstone of exclusion criteria in sustainable funds since the 1990s. For instance, BACOB (now Belfius) built its funds on cooperative and trade union principles. During this event, experts from various sectors shared strategies for embedding sustainability and social justice more deeply into the financial sector.
UN Principles and the Power of Collaboration
Selim Boudhabhay, Responsible Investment Manager at Principles for Responsible Investment (PRI), outlined how UN-supported frameworks help financial institutions integrate sustainability into their policies. Representing over 5,000 signatories and $128 trillion in assets, PRI relies on established guidelines such as the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises—both essential since 2011 for assessing social risks.
Boudhabhay highlighted how the social pillar of ESG is evolving. Beyond labour rights, it now includes issues like data protection and ethical concerns surrounding AI. Quantifying social indicators remains challenging, but Boudhabhay pointed to Advance, a PRI initiative fostering collaboration among institutional investors to promote human rights. This platform targets 25 mining companies and 15 renewable energy firms, both reliant on rare minerals. “In the energy transition, we must avoid repeating the mistakes of the fossil fuel industry,” he stressed.
Practical Implementation of Regulation
Matthew Welch, Responsible Investment Specialist at Degroof Petercam AM, shed light on how regulations such as the Corporate Sustainability Due Diligence Directive (CSDDD) and the Corporate Sustainability Reporting Directive (CSRD) are driving companies toward greater dialogue and adaptation. He emphasized the importance of both ex-ante exclusions (such as normative screening based on OECD guidelines) and ex-post exclusions following controversies.
Welch demonstrated how partnerships with NGOs and investigative journalists can sharpen analysis. For example, DPAM engaged a journalist to uncover controversies overlooked by ESG data providers. “ESG data is just the starting point,” he noted. “Through targeted refinement and collaboration, we can create greater impact.” DPAM’s commitment extends to organizing dialogues between companies, NGOs, and sector specialists, moving beyond mere data analysis.
The Social Dimension: Core of ESG
Michael Herskovich, Global Head of Stewardship at BNP Paribas Asset Management, emphasized that the social component has historically been the foundation of ESG. He referred to BNP’s 3Es: Energy Transition, Healthy Ecosystems, and Equality, highlighting the critical role of dialogue with companies.
“Even a small minority of shareholders can push companies to change,” Herskovich observed. In the U.S., the mere threat of a shareholder proposal often leads to compromises before a vote. He cited examples of how active engagement—through dialogue or joint proposals—can prompt multinationals to address social issues.
Ethical Dilemmas and Consistency
Luc van Liedekerke, Chair of the Eligibility Commission at Towards Sustainability, discussed ethical challenges arising when certain practices are legal in one country but conflict with ESG norms. Matthew Welch referred to the limitations of anti-boycott laws in the U.S., which prevent ESG data providers from collecting information on sensitive regions like Palestine or Western Sahara. “In such cases, we have to rely on alternative sources, such as NGOs and investigative journalists,” Welch explained.
Herskovich stressed that consistency is key. While some companies may be excluded, indirect exposure through index funds can persist. Tom Van den Berghe, Managing Director of Towards Sustainability, highlighted that the label is increasingly applied to credit and insurance activities, reducing indirect contributions to companies that fail to meet sustainability standards.
Dialogue is key
Active engagement, collaboration with NGOs, and the consistent application of guidelines are essential for protecting social and labour rights. While challenges in quantifying social indicators remain, initiatives like PRI and Towards Sustainability demonstrate that progress is possible. According to Van Liedekerke, intensive dialogue with companies—a hallmark of Anglo-Saxon practice—should be further embedded as a requirement for the label.
Luc Van Liedekerke, Chair of the Eligibility Commission, Towards Sustainability