Integrating Human Rights Considerations into Investment Analysis and Decision-Making

In today's interconnected world, investors have a unique opportunity to influence corporate behaviour and promote positive social change through their investment decisions. One critical aspect of responsible investing involves integrating human rights considerations into investment analysis and decision-making processes.

A key tool for businesses to incorporate considerations about human rights into their operations are the UN Guiding Principles on Business and Human Rights, which are the global standard for preventing and addressing the risk of adverse impacts on human rights involving business activity, and they provide the internationally-accepted framework for enhancing standards and practices with regard to business and human rights.

The Guiding Principles clarify that all business enterprises have an independent responsibility to respect human rights and that in order to do so they are required to exercise human rights due diligence to identify, prevent, mitigate and account for how they address impacts on human rights (OHCHR).

Understanding Human Rights Considerations

The idea of human rights is as simple as it is powerful: that people have a universal right to be treated with dignity. Every individual is entitled to enjoy human rights without discrimination - whatever their nationality, place of residence, sex, national or ethnic origin, colour, religion, language or any other status. Human rights are interrelated, interdependent and indivisible (UNPRI).

Companies' responsibility to respect human rights is based on internationally recognised human rights standards  and are understood, at a minimum, as those set out in the International Bill of Human Rights, and International Labour Organization's Declaration on Fundamental Principles and Rights at Work and the eight core conventions.
 

Integrating Human Rights into Investment Analysis

Integrating human rights considerations into investment analysis involves assessing the human rights risks and impacts associated with investment opportunities. This process requires investors to:

Conduct Due Diligence: Investors should conduct thorough due diligence to identify and assess human rights risks associated with companies and industries in which they intend to invest. This involves examining corporate policies, practices, and performance related to labour rights, environmental stewardship, community engagement, and respect for indigenous rights.

Screen Investments: Investors can utilise negative screening criteria to exclude companies with poor human rights records from their investment portfolios. Negative screening involves excluding companies engaged in human rights abuses such as child labour, forced labour, discrimination, environmental degradation, and other unethical practices.

Engage with Companies: Engagement with companies is a vital component of responsible investing. Investors can use their influence as shareholders to engage with companies on human rights issues, advocating for improved policies, practices, and transparency. Shareholder engagement can take various forms, including dialogues with company management, filing shareholder resolutions, and participating in collaborative initiatives with other investors and stakeholders.

Conclusion

Integrating human rights considerations into investment analysis and decision-making is essential for responsible investing. By incorporating human rights criteria into investment practices, investors can align their financial goals with their ethical values, promote corporate accountability, and contribute to positive social change. As investors continue to recognise the importance of human rights in investment decision-making, integrating human rights considerations will become increasingly integral to sustainable and responsible investment strategies.