Social investment policies confined to ESG funds

Not part of firm-level strategies at 80% of asset managers

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Social policies are on the rise at asset managers, but a fifth of firms confine them to their ESG or similarly mandated strategies, a ShareAction report has found.

In part three of its Point of No Returns study, which assesses the policies and practices of 77 of the world’s largest asset managers, who collectively manage more than $77trn in assets, the NGO found only 6% of asset managers had no social investment policy last year, down from 15% in 2020.

However, 19% said social considerations were exclusively an issue for ESG or responsible funds, which the report said “usually represent a small proportion of asset managers’ portfolios, and the real-world impacts of these policies are not as large as they could be”.

Claudia Gray, head of financial sector research at ShareAction, said: “Asset managers should not limit consideration of investee companies’ impacts on human and labour rights, as well as public health, to their ESG funds. Asset owners must step up and demand that human rights are protected consistently across every fund.”

Of the 94% that reported having a social policy, the majority covered human rights (96%) and labour rights (92%), with the most common commitments in these areas made on controversial weapons (86% of asset managers), modern slavery and forced labour (49%), and child labour (44%).

Least common were mentions of living wages, the ethnicity pay gap and the gender pay gap as influencing investment policy. This tallies with an analysis of racial equity in investment decisions by ESG Clarity in March, which found little evidence of racial equity being considered in investment decisions.

The report highlighted Robeco as an example of leading practice on human and labour rights investment policies. The firm reports acting in accordance with the ILO standards, the UN Guiding Principles on Business and Human Rights, the UN Global Compact principles, and the OECD Guidelines for Multinational Enterprises, and has tiered processes for exclusions based on these criteria.

Human rights violations were also generally considered at the company level rather than the state level, with just 23% having a policy on investments in actors engaged in human rights violations. These investments include sovereign bonds issued by countries involved in human rights violations, and corporate debt and shares of companies that are effectively controlled by – or strongly tied to – such governments.

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Where asset managers did address the issue of actors engaged in human rights violations, they mostly focused on sovereign bonds., the report found. For instance, some asset managers reported excluding bonds issued by states that rank poorly in global transparency, corruption or democracy indices. Some reported not investing in sovereign bonds issued by governments that are subject to sanctions of the UN, EU, US, or other applicable local regulators.


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