Request for Proposals: Expanding the Market of Social Metrics for Investors
The extent and scope of Environmental Social and Governance (ESG) investment strategies has grown significantly in recent years.
In the past two decades the number of investment funds evaluating their investments based on ESG factors has increased more than two thousand percent, from 50 in 2000, to more than 1,100 at last count in 2016. Yet social considerations – the “S” in ESG – have often been overlooked or have not meaningfully factored in the welfare of workers.
A 2017 paper from the NYU Stern Center for Business and Human Rights found that 97% of Environmental ratings products and 80% of Governance ratings products target investors as a key audience. Among Social ratings products that number is only 14%.
That same paper found that just 8% of all indicators used in frameworks to evaluate social performance actually focus on the real-world effect that a company’s practice has. The vast majority were focused on measuring a company’s effort.
Earlier this year a group of Commissioners released a seminal report at the United Nations calling on the Financial Sector, including banks and investors to do more to combat modern-day slavery.
25 million people worldwide are victims of forced labor, with 16 million working in the private sector. Every investor’s portfolio, from the Norwegian Sovereign Wealth Fund to the Teachers’ Retirement System of Alabama is connected in some way to modern slavery.
Investors hold a tremendous amount of influence. While they are increasingly paying attention to environmental and governance practices, social factors—especially forced labor and other forms of modern slavery—are not fully understood or considered.
This lack of consideration has both fueled and resulted from a shortage of tools, datasets, and approaches available to groups working with investors on social issues, including forced labor.
Humanity United, the Freedom Fund, and UBS Optimus Foundation are seeking to fund projects that meaningfully shift investor approaches to, and increase the development and use of, social metrics that address forced labor and other forms of modern slavery.
We believe philanthropy can play a role in addressing this shortage, and can help jumpstart a significant shift in how investors account for and engage on forced labor risks in their portfolios.