Swedish national pensions buffer fund AP3 has devised a framework for assessing and evaluating the impact of countries and companies on human rights, saying that as a responsible owner, it does not simply avoid sectors at high risk of violating human rights.
The SEK491.5bn (€42.6bn) fund said human rights was the second of four sustainability focus areas it was developing this year, alongside climate, corporate governance and biodiversity – with its climate action plan having been drawn up in March.
AP3 said its ambition was to fulfill its mission as a responsible owner through active ownership management.
“This means that the fund also invests in companies and sectors with high risks, provided that the companies are deemed to have the ambition to manage human rights,” the buffer fund said.
In recent work on human rights conducted by fellow national pensions buffer fund AP6, the private-equity state investor said it had found private equity firms to have virtually no tolerance for companies contributing to human rights violations.
In the light of this, IPE asked AP3 whether it had at least enough tolerance in certain cases to give it time to engage with such portfolio companies.
Fredric Nyström, head of sustainability and ownership at AP3, said that as a responsible owner and investor, AP3 had to work to ensure human rights were maintained and strengthened where there was a need.
“So through our work, we want to influence companies to improve their work with human rights so violations don’t happen, that is, proactive work,” he said.
“But if a company is discovered to be violating someone’s rights, we act in accordance with the UN Guiding Principles on Business and Human Rights, which means having a responsibility to act – we must work to ensure that the violation ends and that the company implements systems to avoid future violations,” Nyström said.
In its new human rights plan, though, AP3 said it does not invest in companies that systematically and comprehensively against international conventions.
“If the dialogue is not constructive or the goal of the dialogue is not met, AP3 can choose to exclude the company,” the fund said, with dialogue work being conducted through the AP funds’ council on ethics.
As a first step in AP3’s process for scrutinising the effect countries as well as business have on human rights, the Stockholm-based fund said it assesses countries based on parameters such as democracy, respect for human rights, freedom of expression, principles of the rule of law, the judiciary and corruption.
“A country’s governance has implications for the overall risk assessment,” AP3 said, adding that investments in countries with poor governance ran a higher risk of developing in an unsustainable direction, exposing the fund to unwanted risk.
Step two in AP3’s process is an ongoing screening of the fund’s portfolio to pinpoint which companies might be at risk of violating human rights, the fund said.
“Driving influence together with other investors and actors usually produces the greatest effect,” said AP3, adding that the fund participates in several collaborative initiatives, such as the Investor Alliance for Human Rights and PRI’s Advance initiative.
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