–  Expectations to investors are primarily to establish a system to handle risk that companies they invest in may be involved in irresponsible activities, for instance that contributes to human rights violations, Chair of the Norwegian NCP said when he met a group of over 30 investors and consultants in the finance sector in Paris on 16 January.

Hans Petter Graver (to the right) on Investor Roundtable in Paris on 16 January 2014. From left: Sudip Hazra and Stephane Voisin, Kepler Cheuvreux, and Yann Queinnec, Affectio Mutandi.
Hans Petter Graver (to the right) on Investor Roundtable in Paris on 16 January 2014. From left: Sudip Hazra and Stephane Voisin, Kepler Cheuvreux, and Yann Queinnec, Affectio Mutandi.

– Such systems to handle risk or to do due diligence are no hocus pocus, but concerns implementing methods for quality control, well known for instance from the oil sector, Graver said.

OECD financial sector process
Several speakers highlighted that there is broad agreement that the OECD Guidelines apply to all types of financial institutions, but that there is a need to clarify how. The OECD Investment Committee has amongst other established an advisory group to contribute to clarification. The group shall build on investors and other financial institutions’ experiences with promoting responsible business conduct in their portfolios and amongst their clients. The group also has civil society and trade union representation. The Norwegian NCP participates due to its experience with the closed specific instance against Norges Bank Investment Management (NBIM).

The NBIM case
The NCP is a non-judicial body that receives complaints about alleged violations of the OECD Guidelines for multinational enterprises. If the NCP finds that a complaint merits further consideration, the main tool is to offer dialogue and mediation. In the case against NBIM, which concerned active ownership on ethical grounds vis-à-vis a South Korean company about a controversial steel project in India, the NCP did not succeed in mediating. In such cases, the NCP examines relevant parts of the complaint. In this specific instance, the NCP did not look at the specific investment mentioned in the complaint, but on NBIM’s systems to respect human rights in accordance with the OECD Guidelines. The NCP concluded by criticising NBIM for lack of collaboration with the NCP by not answering the NCPs questions during the examination. The NCP also gave recommendations to how NBIM as a manager of the Norwegian State Pension Fund Global may ensure that their systems and processes for due diligence to a higher degree contributes to reduce the risk for human rights violations in their portfolio.

Collaboration gave results
The Dutch NCP has handled a similar case concerning the same controversial project, which resultated in a joint statement between the complainant and the fund manager APG.

– We had several reasons to collaborate, amongst other that we saw some common interests with the complainant, like establishing a dialogue with the company we had invested in about potential improvements, said Anna Pot on behalf of APG.

She encouraged more investors to follow APG, to establish a policy for responsible investment, implement the policy in practice and to practice transparency about what is done and which priorities are made.

– We invest the savings of the beneficiaries of our pension fund clientsand must show how we do it, Pot underscored.

She touched upon a key issue in stakeholder engagement. Companies can learn about talking to their «watchdogs», and the scrutinizers can learn about what they may realistically expect from the companies.

Hans Petter Graver commented that the reason why the Dutch NCP concluded that APG is compliant with the OECD Guidelines, is presumably not because of its engagement with Posco, but because of the due diligence systems in place.

Graver and Pot were invited by Kepler-Cheuvreux and the think tank Affectio Mutandi. In addition, Maylis Souque from the French NCP, Tyler Gillard from the OECD Secretariat and Lene Wendland from the Office of the High Commissionary for Human RIghts (UN OHCHR) gave presentations.

The aim of the workshop was to discuss trends within development of legal and non-legal practice to hold companies and investors accountable for their impact on people and the environment both through their own activities, in the supply chain and through other business relationships. When it comes to non-legal expectations, the OECD Guidelines have the unique feature that they are developed by the governments of OECD countries with support from business, trade unions and civil society in these countries, and because they have an implementation mechanism in the NCPs.

Relevant links:

Kepler Cheuvreux
APG as asset manager