• Equities
  • Responsible Investing
  • ESG

Human rights: The key to understanding the 'S' in ESG

Companies cannot thrive without healthy and happy employees, consumers and communities. Investors must use their influence with companies and other stakeholders to ensure the basic rights of these groups are respected.

Human rights: The key to understanding the 'S' in ESG

In the grand pursuit of profit, some companies have not always prioritised the rights and wellbeing of people. Meanwhile, others have closed their eyes to what might happen at their suppliers.

Investors, however, cannot ignore these issues. The consequences of human rights failures are complex and finding solutions to them will require the full participation of all stakeholders. By holding companies to account for poor practices and directing money to strong-performing businesses that value human rights, investors have a big role to play.

Communities have been destroyed and lives lost in catastrophes brought on by negligent companies. Examples include the Union Carbide factory explosion in Bhopal, India in 1984, which exposed over 500,000 people to a toxic gas, causing immediate deaths and thousands of health issues people still suffer from.1

At any given time 25 million people around the world are trapped in forced labour

Modern slavery is also a key risk, rendered even more difficult to find and eradicate by the layers of suppliers across multiple countries that some companies rely on. According to the International Labour Organisation, at any given time 25 million people around the world are trapped in forced labour; one in four victims of modern slavery are children.2

According to the Ethical Trading Initiative, the most important thing companies can do is recognise “workers’ right to organise, to collectively negotiate terms and conditions of work, and to have the freedom to leave abusive employers. The risk of modern slavery dramatically decreases at workplaces where trade unions are encouraged to operate”.

Why should investors care?

Respecting human rights, offering fair working conditions and pay, and adopting responsible behaviours should form the basis of every company’s approach.

Respecting human rights should form the basis of every company’s approach

The approaches companies need to implement or improve will be different across sectors. “Tech companies such as Facebook and Twitter’s human rights impact will be focused on their customers and how they manage content and protect their freedom of speech,” says Marte Borhaug, global head of sustainable outcomes at Aviva Investors. “In contrast, their direct employees tend to be highly skilled, highly paid, and therefore less likely to suffer from poor working conditions. A mining company, on the other hand, will have the biggest human rights impact on local communities on whose land it operates, and on its large and often low-paid workforce.”

At the employee level, many HR professionals will be familiar with key risks around low wages, precarious contracts, discrimination and harassment, health and safety, and overly long hours, not to mention modern slavery (which includes forced labour, debt bondage and human trafficking).

What investors can do

Incorporating human rights in investment decisions requires investors to identify cross-industry themes and understand key risks at a sector level. They need to discuss these issues with companies and governments, bilaterally and collaboratively with likeminded investors, including using their voting rights as shareholders.

Changes in regulation can play a key role in enforcing responsible behaviour

Talking directly to companies is a powerful tool, but changes in regulation can also play a key role in enforcing responsible behaviour and making companies more accountable. Investors can and should support such regulatory change by liaising with policymakers.

Enforcement of the law on human rights and other areas is vital. In this respect, ensuring that company directors are personally held to account when the law is broken could be more effective than solely imposing fines, which can be passed on to the company’s customers through higher prices for goods and services.

Three points to remember

  • Investors have a key role to play in influencing companies to respect the basic human rights of employees, consumers and local communities.
  • Investors can influence behaviour by talking directly with companies and other concerned parties, and by pushing governments to adopt legislation that requires companies to behave responsibly.
  • Investors can also pressure law enforcement agencies to ensure companies, and in particular their directors, are held to account.

Related views

Important information


Except where stated as otherwise, the source of all information is Aviva Investors Global Services Limited (AIGSL). Unless stated otherwise any views and opinions are those of Aviva Investors. They should not be viewed as indicating any guarantee of return from an investment managed by Aviva Investors nor as advice of any nature. Information contained herein has been obtained from sources believed to be reliable, but has not been independently verified by Aviva Investors and is not guaranteed to be accurate. Past performance is not a guide to the future. The value of an investment and any income from it may go down as well as up and the investor may not get back the original amount invested. Nothing in this material, including any references to specific securities, assets classes and financial markets is intended to or should be construed as advice or recommendations of any nature. Some data shown are hypothetical or projected and may not come to pass as stated due to changes in market conditions and are not guarantees of future outcomes. This material is not a recommendation to sell or purchase any investment.

The information contained herein is for general guidance only. It is the responsibility of any person or persons in possession of this information to inform themselves of, and to observe, all applicable laws and regulations of any relevant jurisdiction. The information contained herein does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorised or to any person to whom it would be unlawful to make such offer or solicitation.

In Europe this document is issued by Aviva Investors Luxembourg S.A. Registered Office: 2 rue du Fort Bourbon, 1st Floor, 1249 Luxembourg. Supervised by Commission de Surveillance du Secteur Financier. An Aviva company. In the UK this document is by Aviva Investors Global Services Limited. Registered in England No. 1151805. Registered Office: 80 Fenchurch Street, London, EC3M 4AE. Authorised and regulated by the Financial Conduct Authority. Firm Reference No. 119178. In Switzerland, this document is issued by Aviva Investors Schweiz GmbH.

In Singapore, this material is being circulated by way of an arrangement with Aviva Investors Asia Pte. Limited (AIAPL). Please note that AIAPL does not provide any independent research or analysis in the substance or preparation of this material. Recipients of this material are to contact AIAPL in respect of any matters arising from, or in connection with, this material. AIAPL, a company incorporated under the laws of Singapore with registration number 200813519W, holds a valid Capital Markets Services Licence to carry out fund management activities issued under the Securities and Futures Act (Singapore Statute Cap. 289) and Asian Exempt Financial Adviser for the purposes of the Financial Advisers Act (Singapore Statute Cap.110). Registered Office: 138 Market Street, #05-01 CapitaGreen, Singapore 048946.