Investors with over USD 1tn in assets have come together to publish a letter to the IFRS Foundation’s International Sustainability Standards Board (ISSB) requesting the need to prioritize global reporting standards that cover human capital and human rights.

 

The ISSB, launched in November 2021 at the Conference of Parties (COP) 26 climate conference, with the goal to develop its own IFRS Sustainability Disclosures aims to develop its own standards for consistent understanding of sustainability’s impact. ISSB’s first climate and sustainability standards were published in June 2023, called IFRS S1 General Requirements and IFRS S2 Climate-related Disclosures.

 

Following its most release, the ISSB launched a Request for Information (RFI) asking for feedback on priorities for its next two-year work plan, outlining four potential projects including biodiversity, ecosystems and ecosystems services, human capital, human rights, and a research project on integration of sustainability information in financial reporting. [1]

 

Stated within the letter, investors demand greater volumes of better-quality workforce data, with a desire to invest in businesses that have human rights abuses in their value chains decreasing. This is partly due to the exposure of human rights abuses observed during the Covid-19 lockdowns and the demand observed for better worker protections and treatments.

 

Also, within the letter from investors, are calls for the consideration of linking human rights, human capital, and social value to be categorized as one. The goal would be to then encourage companies to report on their human rights issues together and prompt more joined-up strategies to address challenges. [2]

 

The Covid-19 pandemic certainly exposed many of the significant challenges to both human rights protection and various aspect of daily life. For example, the focus globally on the Covid-19 response led to the neglection or reduced attention of ongoing human rights issues particularly in informal communities.

A lack of access to stable electricity and internet also shed light on the capacity of lower-class communities to fully embrace hybrid and remote working designed to prevent unnecessary contact in the workplace. Such a disparity in digital access and other potential risks associated with online activities meant a smooth transition and adaptation to online working for some while a complete halt in the ability to bring in income for others. [3] [4]

 

Among the letter’s signatories include several well-recognized businesses such as EQ Investors, Partners Capital LLP, and Montanaro Asset Management. In particular, Robeco Asset Management were very vocal on digital disparities and fond supporters of the Letter response to ISSB. On the issue of digital rights, Robeco highlighted concerns, emphasizing the sensitivity of health data and the need for data protection. While tracking health data can aid authorities in responding to outbreaks, mishandling personal data can lead to mistrust and reduced use of digital health tools. The potential for increased surveillance during crises was also noted, with examples like facial recognition in China and Russia causing privacy concerns and acting rather as deterrents to identifying political opponents. Robeco stated such practices risk violating the fundamental human right to privacy without substantial benefits. [5]

 

The absence of a good regulatory framework that considers all aspects of human rights and capital, the letter states that the new ISSB resources “cannot come soon enough”. Exposure to issues such as data privacy, cybersecurity, or social impacts of AI can badly impact a business’s image, so good management with support from a well-rounded standard can set a company apart. [5]

 

Within the letter emphasis on not integrating human and capital rights, poses risks to the integrity of the ISSB disclosure standards. Investors are in dire need of a unified social disclosure framework that covers all aspects of human and capital rights. To meet this demand, it is proposed in the letter that the ISSB embark upon a joint research project to provide market clarity on how to consider and disclose human capital and human rights information as a whole.

 

Another example, as the financial materiality of human and capital rights becomes clearer, it is crucial investors have transparent access to comprehensive and comparable social data from businesses to help inform and deliver better decision-making. For instance, human rights risks issues are not always considered less material. In the workplace, there are standards in place but often are limited beyond mandatory requirements such as dedicated trainings of human rights due diligence.

 

Moreover, when considering the value chain of a company, it is important to consider human and capital rights at all supplier levels. In industries where it is a supplier-intensive sector such as aerospace, a close relation with the suppliers and a good understanding of the origin of any component and is essential. This means going all the way down the supply chain to evaluating how the raw materials are extracted for the components and the treatment of workers in the process.

 

A concise ESG disclosure standard from ISSB that covers human rights and human capital, is necessary for companies. The Letter addressed highlights the need to embrace accountability, adopting a dual materiality approach and setting the bar higher on basic human rights regulations. This involves addressing not only significant business risks but also human rights risks that matter to all stakeholders. An estimated half of the world’s biggest companies are unable to prove whether they align with UN requirements on human rights, which suggests the need for ISSB to roll out its next standards should be a priority. [6]

 

출처

1.  https://www.esgtoday.com/investors-urge-issb-to-develop-reporting-standard-for-human-rights-and-human-capital/
2. https://www.edie.net/investment-giants-press-for-new-global-disclosure-standards-on-human-rights/
3. https://www.ohchr.org/sites/default/files/DefendingRightsinthetimeofCovid-19.pdf
4. https://www.worldbank.org/en/publication/human-capital/publication/collapse-recovery-how-covid-19-eroded-human-capital-and-what-to-do-about-it
5. https://www.robeco.com/en-int/insights/2020/05/si-opener-protecting-digital-human-rights-in-the-post-covid-19-era
6. Half of corporates unable to prove they are protecting human rights, report reveals edie