Human rights could be poised to challenge climate change's lock on the hearts and minds of ESG investors even as that topic has left some global retailers under pressure this year in the world's fastest-growing consumer market.
Over the past month, name-brand global retailers such as Hennes & Mauritz AB, Stockholm (H&M), and Nike Inc., Beaverton, Ore., have faced a backlash in China's huge consumer market after eschewing cotton grown in that country's Xinjiang province over concerns about forced labor involving members of China's Uyghur minority.
Against that backdrop, Principles for Responsible Investment, the London-based organization that's helped make environmental, social and governance concerns a focus for institutional investors over the past five years, announced April 12 that human rights will become a priority area for the organization in coming years — joining climate change as a focus for the high-profile responsible investment forum.
Fiona Reynolds, PRI's London-based CEO, said in an interview that over the coming five years, human rights-related questions will be added — on a voluntary basis at first but later mandatory — to the reporting framework agreed to by PRI's signatories, which number nearly 4,000 and oversee more than half of institutionally managed assets globally.
A growing number of policymakers and investors have come to understand that all ESG issues are interrelated; "you can't just do one and not the other," Ms. Reynolds said. For example, the need to shift to renewable energy from fossil fuels is urgent but understanding the social cost for workers losing relatively high-paying fossil-fuel jobs and transitioning them to similarly good-paying jobs will be key to facilitating that shift, she said.
Human rights will be the next big issue for investors, said Hortense Bioy, Morningstar Inc.'s London-based director of sustainability research. With the relentless advance of information technology, it will become ever harder for companies to ignore seamier elements of their supply chains they've managed to keep opaque until now, she said.
ESG's S pillar — including human rights, racial justice, and diversity, equity and inclusion — is where Ropes & Gray LLP, a New York-based law firm that advises companies, money managers and asset owners around the world on ESG-related issues, has seen the greatest pickup in interest among clients over the past year or two, said Michael R. Littenberg, a New York-based partner with the firm.