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In November, the third report of the Corporate Human Rights Benchmark (CHRB) was published.
[10] The CHRB compares the human rights performance of 195 companies in sectors where the risk of involvement in violations is big: clothing, raw materials, agriculture and - for the first time in 2019 - ICT.
In these sectors, three quarters of the companies are doing better in terms of human rights than they were a few years ago.
But we also see that there is still a gap between the small group of companies that are on the right path and the large number of companies that are still not doing much about human rights.
APG was one of the founders of the CHRB in 2017. We expect that the annual publication of the human rights index will encourage companies to take human rights seriously and to give them a place in the business strategy. The ranking is also important to us to:
Increasingly investors are embracing the CHRB for the evaluation of the human rights performance of companies. Its merger with the World Benchmark Alliance in 2019 will enable the evaluation of many more companies in the future.
5.2 What does APG want to achieve?
In terms of human rights, we have special attention for several sectors where problems occur relatively often, such as the clothing industry and raw material extraction. The following factors played a role in the selection of these sectors:
We try to make agreements with companies in these sectors to make improvements. It is also important to us that companies join initiatives in their sector to prevent malpractice and to deal with this.
[10] For the ranking we look at salaries, work times, safety and child labor, among other things. We also evaluate how companies deal with accusations of human rights violations.
APG Responsible Investment Report 2019 25.
What may indicate risks? Examples Possible risks What do we expect? Example dialogue.
Sector Telecom and software Violation of clients’ privacy; government requests client details.
Company shows it is aware of the risks and shows it is prepared to take action; has human rights and privacy policy.
Alphabet (Google)
Energy and mining Negative impact on local community; excessive violence to guarantee safety.
Company shows it is aware of the risks and shows it is prepared to take action; has human rights and privacy policy.
Barrick Gold.
Country/ region Companies active in disputed areas or countries where human rights are violated.
Company may have direct or indirect connection to human rights violation.
Company shows it is aware of the risks and shows it is prepared to take action; has human rights policy.
HeidelbergCement.
News / Incidents Companies in the news due to labor unrest, accidents, discrimination, land conflicts, or child labor.
Incidents may indicate that company does not have a good handle on processes and human rights may be violated.
Company is taking actions to solve problems, limit impact and minimize risk of repetition.
Wynn Resorts.
DIaloog about human rights 5.3 Theme: fair raw materials.
Particularly in countries with unstable or authoritarian regimes, the presence of raw materials and – often foreign – extraction companies may contribute to the violation of human rights. It could concern, for example, land rights, bribery and corruption, environmental degradation and unsafe working conditions. APG had...
We expect all the companies involved to develop a policy approved by the executive board regarding human rights, including the commitment to investigate, deal with existing problems and implement a complaints procedure.
One challenge is that addressing human rights in ‘risk countries’ is often subject to political sensitivities. It is also not always clear what is the responsibility of a company and what is the responsibility of the government of the country where the company is active.
5.4 Theme: digital rights in the ICT sector.
When ICT companies do not treat personal data in the right way, this can lead to data leaks and violation of human rights, such as the right to privacy, freedom of expression and protection from discrimination. This is also referred to as ‘digital rights’.
We expect companies in the sector to pay attention to privacy and human rights at the highest level, to be open about their policy and its execution in practice, and to cooperate with other.
ICT companies to prevent digital rights from being violated.
In 2019 we were in discussion with Facebook, which came into disrepute when it was found that the political marketing company Cambridge Analytica had gained access to the personal data of the users. Since then, Facebook has explicitly declared data privacy to be the responsibility of the executive board.
Although progress was made, respect for digital rights clashes with how ICT companies make money: by accumulating user profiles through ‘free’ services and selling customized ads.
5.5 Theme: malpractices in the clothing industry.
APG has been in discussion with ten big clothing companies about safety and fair labor since 2015. We encourage them to be more transparent about their suppliers, so that we can hold clothing companies and brands accountable. When companies have a better view of their supply chain, they can also deal with malpractices ...
The number of clothing companies that are open about their suppliers has doubled in the past three years.
[11] Sustainability is also increasingly playing a role for companies in their choice and evaluation of suppliers.
Since the collapse of the production complex Rana Plaza (2013), over 1,600 textile factories in Bangladesh have been evaluated for safety by independent inspectors. After the Bangladeshi judge had determined that the inspections must be stopped, we made a strong case for continuation.
[12] Thanks to international pressure, the termination of the inspections was prevented in 2019.
[11] Seven (of the ten) companies we spoke with have now published a list of suppliers. [12] APG joined in with the calls from the Bangladesh Investor Initiative for the continuation of the Bangladesh Accord, in September 2018 and February 2019.
APG Responsible Investment Report 2019 26.
Nevertheless, the clothing sector is still characterized by long supply chains, ‘fast fashion’ and intense competition for production costs. As yet, very few consumers seem prepared to pay for fair fashion.
5.6 Theme: safety in the shipbuilding industry.
There is a relatively high number of fatal accidents in the shipbuilding industry. APG wants shipbuilders to recognize the importance of occupational safety and develop policies to improve safety in the sector.
Our efforts are focused on several Chinese and Korean shipbuilders, because they are the countries with the most safety incidents. Several large buyers of ships have an important role to play here; we are encouraging them to address structural safety with the suppliers. We are seeing that they are paying more attention...
The shipbuilding industry is very dependent on developments in the world economy. There is a chance that the big buyers of ships will look for cheaper alternatives during an economic downturn. The question then will be whether the Asian shipbuilders will continue on the same track of their own accord.
5.7 Theme: safety in infrastructure.
We want to be able to assess whether enough attention is given to safe and healthy working conditions in our infrastructure investments. Our goal is for half of our infrastructure investments to participate in the annual GRESB infrastructure asset assessment for safety and sustainability in 2020. APG is one of its init...
In 2019, 79% of our investments (based on invested assets) participated in this assessment. For investments in new infrastructure, participation in the GRESB infrastructure assessment is a condition.
Examples of APG’s infrastructure investments are the Route du.
Soleil in France and Merkur Offshore, a big wind farm in the.
German part of the Wadden Sea (more about this in Chapter 6).
At this time, we do not yet have reliable numbers that are needed to assess whether safety and health have improved in infrastructure. We are also seeing that companies are primarily focused on their own employees and much less on those of other parties involved.
5.8 Theme: cobalt working conditions.
Cobalt is an indispensable raw material for batteries in, for example, electric cars and smartphones. APG is the initiator of a collaboration between major investors to tackle child labor in cobalt mining in the Democratic Republic of the Congo, where half of the world's production comes from.
We are focused on fifteen major electronics, auto and battery manufacturers. We want them to determine where their cobalt is coming from and to develop a policy to limit the risk of involvement in the violation of human rights. We also expect them to take measures if they detect any malpractices.
Most buyers we have spoken with have now identified their supply chain and set up controls. Some companies have also developed programs to support local communities and for safe and socially just extraction of cobalt in artisanal mines.
APG Responsible Investment Report 2019 27
5.9 Theme: child labor in the cocoa sector.
We ask chocolate and cocoa companies to publicly commit to the elimination of child labor and to develop initiatives to identify and combat child labor in the local cocoa-producing communities. We also want them to cooperate within the sector and report on their efforts.
In recent years, we have been focusing on five major buyers and traders of cocoa: Barry Callebaut, Lindt & Sprüngli, Mondelez,
The Hershey Company and Nestlé. Together, they supply over half of all the chocolate consumed worldwide. These companies have taken big steps, including setting up controls to eradicate child labor in hundreds of local communities. Within the.
CocoaAction initiative, the sector has also developed a joint approach to child labor.
This has not yet solved the problems in the sector. Child labor in cocoa farming has deep-rooted and structural causes. Yields are very low and entire villages are dependent on the erratic world market for cocoa. A successful approach therefore requires the commitment of all parties involved.
5.10 First case of IMVB covenant.
In 2019, the Dutch pension sector gave further substance to the covenant on International Socially Responsible Investment (IMVB). In this covenant, agreements have been made with the.
Dutch government, trade unions and environmental and social organizations to prevent abuses in the companies in which investments are made.
[13]
A limited number of pension funds - including ABP, bpfBOUW and SPW - are also collaborating on six specific projects to increase their influence as responsible investors. The first case within this ‘deep track’ was identified in 2019. It concerns an international mining company. In the mining industry, the risk of invo...
In 2019, we also worked hard on the ‘toolbox’ that will help pension funds implement the agreements in the covenant. The number of participating funds has increased to 81, which together represent 90% of the Dutch pension assets.
On behalf of our pension fund clients, APG was one of the pioneers of the IMVB covenant, which was signed at the end of 2018.
[13] Guidelines for the agreements in the covenant are The OECD rules for multinational enterprises and the UN Guiding Principles for Business and Human Rights.
APG Responsible Investment Report 2019 28
6 Climate change and the environment
APG Responsible Investment Report 2019 29.
When making investment choices, we take into account the G future costs that a company will have to incur as a result of climate change, such as rising costs for carbon emissions.
We are engaging with companies about their strategy for the G transition to a carbon-neutral economy.
We are reducing the carbon emissions of our equity portfolio G in line with the objectives of our pension fund clients.
integrate climate risks and opportunities into their G governance, management and business models; take measures to reduce greenhouse gas emissions; G provide insight into the financial risks of climate change G according to the standards of the Task Force on Climate- related Financial Disclosures (TCFD).
The consequences of climate change are becoming increasingly visible. APG belongs to a select group of asset managers that are world leaders in identifying climate risks and the potential impact on investments.
6.1 Targeting climate risks.
APG invests all over the world and has a very diversified portfolio. We therefore expect climate change and the energy transition to impact our investments gradually. However, we remain vigilant to sudden and unexpected changes. We are also already taking measures to make the portfolio climate-proof, such as:
In 2019, APG took steps to gain better insight into the physical and transition risks of climate change when investing in real estate. Physical risks (such as damage caused by extreme weather) strongly depend on the location of the investment. We are working on a database of the physical climate risks of our global rea...