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ISSB Urged to Prioritize Human and Worker Rights in Next Set of Reporting Standards

The investor letter asserts that the financial materiality of human rights-related topics – and the critical role of human rights due diligence in identifying business risks – has never been clearer, and that ‘investors are in dire need of a unified social disclosure framework.’

A coalition of 24 investors spanning six countries and managing assets of more than US$1 trillion — including Impax Asset Management, Scottish Widows, Sycomore Asset Management and the Universities Superannuation Scheme — has called on the International Sustainability Standards Board (ISSB) to make human capital and human rights a priority for its next set of global reporting standards.

The letter, coordinated by responsible investment NGO ShareAction and signed by the 24 investors, states that investor demand for greater volumes of better-quality workforce data “is at an all-time high” and urges the ISSB to prioritize researching human capital and human rights disclosure standards in its upcoming two-year work plan.

The investors have written to the ISSB specifically in response to its Request for Information (RFI) — launched in May 2023 — seeking feedback on which area of sustainability to focus its next set of standards. In June, ISSB issued its inaugural standards — IFRS S1 and IFRS S2 — which create a common language for companies to report on how sustainability and climate-related risks and opportunities affect their prospects, focused notably around a concept called ‘resilience science.’ ShareAction and its investor friends are asking that the next set of standards address the human, versus the environmental, side of this equation.

“This is an opportunity for the ISSB to set the global reporting baseline needed for investors to be able to understand and take meaningful action on labor and human rights abuses,” says James Coldwell, Head of the Workforce Disclosure Initiative (WDI) at ShareAction. “We know that workers around the world face exploitation by unscrupulous companies, harming the workers themselves and creating risks for investors. Tackling these issues can only be achieved when there is transparency around corporate practices — something the ISSB is perfectly positioned to deliver. This is why we're calling on them to prioritize research into human capital and human rights, to develop a globally accepted reporting framework.”

Attempts to hold companies accountable for the social aspect of sustainability (the ‘S’ in ESG) have begun to emerge in major markets in the form of legislation such as the EU’s proposed Directive on Corporate Sustainability Due Diligence, the US’s Uyghur Forced Labor Prevention Act, and even GRI’s most updated reporting Standards.

Crucially, the letter also calls on the ISSB to consider “how to disclose human capital and human rights information together” by addressing the relationships and connections between the two topics. It argues that, in practice, neither companies nor investors treat the two topics as totally separate areas.

Human rights due-diligence processes, for example, are used as key tools for identifying labor issues; concepts such as unionization and modern slavery clearly belong to both categories.

The ISSB letter follows a recent ShareAction opinion poll commissioned to gauge the views of British adults on how they felt about where their money was invested. The results showed an overwhelming majority (74 percent) of people would have a more negative view of financial institutions that invest in companies which fail to meet human and labor rights standards.

Vincent Kaufmann, CEO of signatory Ethos Foundation, said: “COVID-19 — and the subsequent mass fluctuation it caused in the labor market — has emphasized just how critical human beings are to the long-term success of any business. Be it good people management within the workforce or comprehensive human rights due diligence across the supply chain, an organization which prioritizes human wellbeing stands the best chance of succeeding in the future.

“As the financial materiality of these issues becomes increasingly clear, it is crucial investors have access to comprehensive and comparable social data from businesses to help inform investment decisions,” he added. “It is imperative the ISSB prioritizes developing human capital and human rights standards as soon as possible to help deliver this.”

The WDI has also announced that it is launching an investor working group focused on global social data reporting, which will launch following the closure of the RFI on September 1st, 2023.