‘Short-termism’ hampers human rights efforts

Reports findings based on analysis of UNGPs integration by investors

September 24, 2021

Barriers to addressing human rights breaches in investment pipelines remain despite significant strides made over the past decade, a UN Working Group on Business and Human Rights report has found.

The report – Taking stock of investor implementation of the UN Guiding Principles on Business and Human Rights – stated that among the barriers was a “corporate culture of short-termism” driven by investors that permeates businesses globally.

The report also found that capacity challenges, investor inability to assess human rights risks, and lack of governance-based human rights approaches, present as key issues to adequate rights-respecting investment.

A lagging private equity sector, along with misalignment of policy and legal frameworks are also significant obstacles, according to the report.

“To respect human rights, investors are expected to know the risks to people connected with their investment activities and show how they take action to manage those risks. Engaging stakeholders in this process is essential,” said Anita Ramasastry, member of the UN Working Group on Business and Human Rights.

The report follows the launch of the UNGPs Next Decade BHR Project, which assesses the first 10 years of implementation of the UN Guiding Principles on Business and Human Rights (UNGPs).

The project dedicates focus to the roles that institutional investors – asset owners and managers –in assessing human rights risks, and it sets out various recommendations for the investment community.

One recommendation is that investors engage with portfolio companies to address fundamental causes of short-termism by, for instance, striving for integration of human rights into governance expectations and at the board committee level, and linking executive pay to human rights performance, among other measures.

The report also acknowledges the leadership of the European Union in “redefining the responsibilities of institutional investors”, by mandating environmental, social and governance considerations, including human rights factors, placing them front and centre of its financial system.