The report evaluates institutional investors’ roles in the implementation of the UN guiding principles for business and human rights in the past decade. Enabling environments aiding rights-respecting investments have emerged, however, access to remedy for victims requires urgent attention, and other investment ecosystem actors must step up.

Investor roles, responsibilities, and expectations

The responsibility to respect human rights as per the Guiding Principles applies to all investors regardless of size, location, ownership or structure. Despite progress in some areas over the past decade, institutional investors are yet to enact robust, institution-wide policy commitments and governance structures to respect human rights in line with the Guiding Principles. More needs to be done to create and implement transparent and comprehensive ESG reporting frameworks.

Investor uptake and progress in the Guiding Principles

The report highlights progress in investor uptake of the Guiding Principles over the past decade, largely due to increased efforts from standard-setting bodies seeking to create an enabling environment. The correlation between human rights risks, corporate performance, and risks to investments has also bolstered investor engagement on human rights issues. However, uptake has been inconsistent and insufficient across governments and standard-setting bodies.

Investor expectations and challenges in human rights risk assessment

Investors must use a risk-based approach to identify particularly high-risk sections of the portfolio where the risk of adverse impacts is most significant. While some investors may engage companies on their human rights policy commitments, most do not have sufficient human rights expertise for evaluation and analysis to assess the quality and effectiveness of such commitments.

Investor transparency and disclosure

Insufficient reporting from asset managers leaves clients unclear about the degree to which human rights policy commitments are translating into action, posing challenges for assessing human rights risks at scale. Private equity, in particular, is yet to disclose formally how they take action to prevent, mitigate and address severe human rights risks.

Recommendations for institutional investors

Institutional investors can fulfil their responsibility to respect human rights by avoiding infringing on human rights throughout their investment activities and addressing adverse human rights impacts with which they are involved. The report provides a set of recommendations, including engaging with companies and reporting frameworks to ensure that ESG-related engagements are publicly disclosed, imposing greater taxes on short-term capital gains, and reforming disclosure requirements to align with longer periods.