The imperative of social disclosure: ShareAction’s ‘Point of No Returns III: Social’ report

ShareAction, a UK-based responsible investment charity, recently published its report ‘Point of No Returns III: Social’, offering an analysis of global asset management practices. The report revealed a disconcerting fact: only six per cent of the 77 largest asset managers in the world are excluding investments in companies implicated in human rights abuses across all their funds. This raises significant concerns about the role of asset managers in potentially exacerbating issues such as unsafe working conditions, widening social inequalities, and the proliferation of weapons.

Why engage in social disclosure?

Before we delve into the specifics of the report, it’s essential to understand why engagement in social disclosure, and human rights specifically, is of utmost importance to asset managers.

Social disclosure refers to the practice of companies revealing information about their social impact, including their human rights record. This transparency allows investors and other stakeholders to make more informed decisions and hold companies accountable for their actions.

Engagement in social disclosure is not merely a moral imperative; it also makes good business sense. Increasingly, stakeholders, including clients, employees, and the public, are demanding that companies act responsibly. Investors too are recognising that companies with strong social and human rights records often deliver stronger long-term returns and are less susceptible to reputational damage and legal risks.

Moreover, as society continues to grapple with issues such as inequality, climate change, and conflicts, the role of businesses in contributing to or alleviating these problems is under greater scrutiny. This scrutiny extends to public health concerns. It’s startling to note that public health emerged as a recurrent oversight for asset managers in the report. While numerous asset managers have policies addressing issues like slavery and weapons, they frequently exhibited a readiness to invest in companies associated with potentially harmful industries such as gambling, alcohol, tobacco, and the manufacture of unhealthy foods and beverages.

Alarmingly, lax governance was observed regarding the exclusion of companies that actively counter global efforts to enhance medical care and improve housing standards. Consequently, asset managers who fail to engage in social disclosure risk being seen as part of the problem rather than the solution.

ShareAction’s call to action

The report from ShareAction calls for asset owners to insist on consistent application of human rights principles across all their managers’ funds. It is a clarion call for increased accountability, echoing the sentiment that responsible investment should be the norm, not the exception. A striking 40% of asset managers reportedly fail to engage with companies on their social disclosure, indicating vast room for improvement in the industry.

How SI Engage can help

SI Engage can prove instrumental in this context. SI Engage provides a comprehensive platform for asset managers to plan, track, analyse, and engage with companies on their social impact. The tool facilitates the understanding and monitoring of a company’s performance in areas such as human rights, helping asset managers make more informed investment decisions.

With SI Engage, asset managers can communicate their expectations to companies and track their progress over time. This continuous engagement can encourage companies to improve their practices, thereby reducing the risk of human rights abuses and other social issues.

The ‘Point of No Returns III: Social’ report serves as a stark reminder of the industry’s responsibility towards social issues and human rights. As global asset managers, we have the power and the duty to influence companies positively and contribute towards a more equitable and sustainable world. By prioritising social disclosure and leveraging tools like SI Engage, we can ensure that our investment decisions align with these values, offering financial returns and contributing towards a better society. The time to act is now.

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