Human rights issues cut across companies, sectors and geographic regions and encompass several of the environmental and social issues that Pax World considers in its Environmental, Social and Governance (ESG) analysis. The term “human rights” has been given several definitions, though perhaps the most commonly accepted one is that provided by the United Nations Declaration on Human Rights1. These standards are universal and are expected to be upheld by governments and corporations alike. According to John Ruggie, the UN Special Representative of the Secretary-General, human rights abuses caused by companies present risks to society at large2:
“Business is the major source of investment and job creation, and markets can be highly efficient means for allocating scarce resources. They constitute powerful forces capable of generating economic growth, reducing poverty, and increasing demand for the rule of law, thereby contributing to the realization of a broad spectrum of human rights. But markets work optimally only if they are embedded within rules, customs and institutions. Markets themselves require these to survive and thrive, while society needs them to manage the adverse effects of market dynamics and produce the public goods that markets undersupply. Indeed, history teaches us that markets pose the greatest risks ? to society and business itself ? when their scope and power far exceed the reach of the institutional underpinnings that allow them to function smoothly and ensure their political sustainability. This is such a time and escalating charges of corporate-related human rights abuses are the canary in the coal mine, signaling that all is not well.”
In addition to being an indicator of greater market problems, human rights problems can also impose legal and reputational risks.
Pax believes it is the responsibility of businesses to protect and uphold human rights. Though the list of human rights issues that companies face is extensive, there are certain current human rights issues that Pax is paying particular attention to:
- Repressive Regimes: Pax favors companies that are transparent about operations in places where repressive regimes are in power. Pax World generally avoids investing in any company with direct involvement in conflict and those with a history of problems and no disclosure or policy regarding operations in countries with repressive regimes. This includes all conflict zones, including but not limited to the Sudan and Burma.
- Human Trafficking: Pax favors companies that have policies in place that prohibit human (labor and sex) trafficking and have programs in place to educate employees and consumers about related risks. Pax generally avoids investing in companies that have been involved in human trafficking and have failed to take steps to prevent additional problems. Pax may also avoid companies with policies and programs if records indicate they have been ineffective in preventing involvement in trafficking.
- Negative Images & Stereotyping: Pax examines whether companies use demeaning or negative images of indigenous peoples, women or other identifiable groups in their advertising, brand, or mascots. Pax generally avoids investing in those companies whose practices are deemed to be most egregious – e.g., when they have refused to negotiate with or acknowledge stakeholders and/or when such stereotyping is judged to be particularly offensive or destructive of cultures or groups.
When considering a company’s human rights record, Pax generally avoids investing in companies with a history of human rights abuse and no policy or disclosure regarding human rights. Pax may also avoid companies with policy/programs if the record indicates the policy or programs are ineffective.
The issues highlighted above are illustrative and do not necessarily reflect the full range of human rights issues Pax World may consider in analyzing a particular security for investment.
2John Ruggie, “Protect, Respect and Remedy: a Framework for Business and Human Rights.” April 7, 2008.