Monday, 24 April 2017

Pension funds and labour standards

I recently spent quite a bit of time trawling pension fund's responsible investment policies to see what, if anything, they say about labour issues. The background to this is the long-expressed gripe that investors seem to spend less time looking at the S in ESG than the E and G, and, as a result, it can be hard to get them focused on labour issues.

What I found was that, actually, a lot of big pension funds and providers in Europe do have policy around labour issues, with many referring to the UN Global Compact, OECD MNE guidelines and ILO conventions. But there is a big geographical bias. Most funds in countries like the Netherlands, Sweden and Denmark (which all have some big funds) refer to labour standards in one way or another. But most funds in the UK do not.

This is, to put it mildly, a bit of a problem since the UK is also a country where workers have no formalised role in corporate governance. So we don't get board representation, but nor do our pension funds promote labour rights in their ESG policies.

One of the things that surprised me while doing the research was how may ex-UK pension funds still apply screens and/or divestment policies. In the UK we are a bit sniffy about this approach and personally I still think engagement is what we want at most companies for most of the time. But doing the research has firmed up my belief that the UK really has no place to tell other jurisdictions how to do RI - our funds are laggards in my opinion when it comes to international standards (for example, little discussion here about application of the OECD guidelines).

In terms of which companies are excluded because of labour issues, I specifically looked at Walmart (because I was aware it was on some funds' exclusions lists) and Ryanair (because.... well... because it's Ryanair innit?). Here's what I found

And finally there are some good examples of strong policies on labour issues out there, probably my favourite is ERAFP, below:

The full report is available on the ITF website here: 

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