Committee on Workers' Capital

CWC Blog: Bringing workers' rights to the epicenter of change at SSGA

Tamara Herman — 2022-03-27T23:04:35Z

Equipped with a high-level commitment to the “S” in “ESG” and new set of stronger policies on social issues, State Street Global Advisors is now better positioned to hold companies to account on fundamental labour rights.

“The “S” is probably the epicenter of where the greatest change has happened over the last several years.” This is what State Street Global Advisors' (SSGA) CEO Cyrus Taraporevala told Just Capital in an interview in March 2022.

The “S” in “ESG” - or fundamental labour rights specifically- has been the focus of a multi-year engagement convened by the Global Unions' Committee on Workers' Capital (CWC) between SSGA and board members at pension funds that are clients of the world's third largest manager. Although the road ahead is long, trustees participating in a follow-up engagement with SSGA in late March will see signs that the asset manager is moving in the right direction.

When the CWC first looked at SSGA's ESG stewardship policy framework in 2019, there was no mention of workers' human rights or labour standards. SSGA disclosed very little about its approach labour-related issues, providing no examples of company engagements in the area and voting in line with only two out of eleven CWC proxy vote recommendations.

A group of Australian trustees joined the CWC in meeting with SSGA to highlight these concerns, raising workers' rights issues in portfolio companies such as Woolworth's and XPO Logistics in the meeting.

Fast forward to June 2021. The COVID-19 pandemic and racial justice uprisings had resulted in more scrutiny of how large asset managers account for social factors in their stewardship practices. The CWC released an analysis of SSGA's revised ESG stewardship policies and practices. It then convened a meeting with over 20 trustees from around the world.

At the meeting, trustees reiterated their request that SSGA reference and incorporate fundamental labour rights in its ESG stewardship framework. They also pressed the manager to engage with specific companies - including Amazon, Chartwell Retirement Residences, Marathon Petroleum Corporation, McDonalds and XPO Logistics - on fundamental labour rights.

SSGA's Q2 2021 stewardship report indicates that the asset manager indeed followed up on requests to engage with many of the companies raised by trustees in the CWC meeting, including Amazon, Marathon Petroleum Corporation, McDonalds, and XPO Logistics.

In early 2022, SSGA published its first Guidance on Human Rights Disclosures & Practices. In this guidance, the manager articulates an expectation for its portfolio companies to identify and manage human rights risks in their operations, as defined in the Universal Declaration of Human Rights and the ILO Declaration on Fundamental Principles and Rights at Work and in alignment with the UN Guiding Principles on Business and Human Rights. The SSGA Guidance also asks companies to describe which “mechanisms exist for workers to raise grievances without fear of retaliation.” This is in alignment with the recommendations brought forward by the CWC.

This policy establishes a clearer commitment from which client asset owners can hold SSGA to account. It sets a path for the next step in the upcoming CWC engagement with SSGA: fostering a stronger understanding of the importance of fundamental labour rights in its approach to human rights and human capital management.

Workers' “voice” and trade union rights

SSGA's new suite of documents on social issues includes several related pieces: Guidance on Human Capital Management Disclosures & Practices, which sets human capital management expectations for companies; Human Capital Management Insights, which contains narrative reports of engagements on workforce issues according to key themes; and Human Rights Insights: Addressing Modern Slavery in Supply Chains, which reports on its engagement campaign. A theme shared between these three documents is the role that employee voice plays in due diligence and decent workplace practices.

Human Rights Insights: Addressing Modern Slavery in Supply Chains, for instance, defines employees as “the first line of defense in identifying signs of modern slavery” and emphasizes that “companies should establish mechanisms to enable employees to share concerns about modern slavery with management without fear of retaliation.” The manager's Guidance on Human Capital Management Disclosures & Practices tells companies that it expects disclosures on “Voice: How concerns and ideas from employees are solicited (and if appropriate, acted upon), and how the workforce is engaged in the organization.” The Guidance on Human Rights Disclosures & Practices suggests that a best practice is company disclosures on “which mechanisms exist for workers to raise grievances without fear of retaliation.”

In its upcoming engagement, the CWC will ask SSGA to acknowledge the relationship between trade unions and “employee voice.” The CWC Secretariat sees an important distinction between a worker's voice and workers' collective voice. Added pressure on companies to provide human capital management disclosures has contributed to a proliferation of reporting on company-built mechanisms for workers to express concerns and priorities (e.g., Amazon report). Tools such as employee surveys or company-established structures do not replace collective bargaining processes where workers can exercise control in determining their wages and working conditions. Furthermore, in jurisdictions where laws are inadequate, trade unions provide workers with more protections from retaliation when they raise grievances.

The upcoming SSGA engagement is coming at a time when workers' rights to form a union and bargain collectively are under attack across the world. SSGA is charged with the stewardship of the retirement savings of countless workers and has reiterated its commitment to upholding human rights, including fundamental labour rights. This year, we are looking for more information on how SSGA engages (and escalates engagements) when a company violates workers' rights to freedom of association and collective bargaining. We look forward to convening asset owner board members across the world with SSGA to continue this important and fruitful work.

Photo: Flickr/Anthony Quintano

Asset manager perspectives on materiality: how are they reflected in the IFRS sustainability reporting plans?

Hugues Letourneau — 2021-04-14T15:37:56Z

See the CWC Secretariat's article published in Responsible-investor.com (open access) on April 9th 2021.
https://www.responsible-investor.com/articles/asset-manager-perspectives-on-materiality-how-are-they-reflected-in-the-ifrs-sustainability-reporting-plans

- News / Asset Manager Accountability, Regulation and Policy, Asset Manager Accountability, Opinions, News

Labour risks at Amazon's operations in Spain

Tamara Herman — 2020-04-22T06:20:50Z

An update on Amazon's operations in Spain by Mario Sanchez Richter, Confederación Sindical de Comisiones Obreras (CS CCOO).

After several people developed symptoms in Amazon centers, management unilaterally implemented a protocol for prevention and action in response to the pandemic. The response was insufficient and did not lay out an effective method of implementation.

At the time, Comisiones Obreras (CCOO), communicated to Amazon management that the measures in various work centers were insufficient to protect the health of the workforce. For example, the minimum social distances for safety were not even respected.

It should be noted that companies that work in the distribution and delivery of products purchased in electronic commerce are considered essential, and a Royal Decree obliges them to maintain the service.

In Spain there are currently approximately 25 Amazon distribution centers, and yet only six benefit from workers' representatives. The CCOO union is only present in 5 of these centers. The Amazon distribution centers with union representation include both large work centers (around 1500 workers or more) and small centers (with less than 300 workers). In centers where there is no workers' representation, it is difficult to obtain information and assess the situation during the pandemic.

After the company made few improvements, CCOO filed a request with the Labour Inspectorate (Inspección de Trabajo y Seguridad Social) to review Amazon's health and safety response to the pandemic at several distribution centers.

In the smaller work centers, addressing safety issues did not present as many challenges as in the larger centers. For example, a center in San Fernando de Henares, the Labour Inspectorate was forced to pursue a difficult path that included, over several weeks, multiple extraordinary meetings, informal meetings, evaluation reports and counter-responses filed by the company. The Labour Inspectorate's visit to the facilities resulted in – after a great effort on the part of workers' legal representatives carried out by the CCOO unit – the application of more than 100 direct safety measures. It also resulted in the creation of a Work Commission, composed of company and union representatives, whose purpose is to evaluate and monitor the measures taken for the protection of the health of the workforce against COVID-19. Since the COVID-19 Commission was launched, more than 140 health and safety issues have been detected. New measures continue to be developed.

In the two months since the outbreak began, eight workers of 200 have tested positive for COVID 19 and completed their quarantines in the distribution centers with workers' representation. This data cannot be completed for the 18 centers without union representation.

Photo: Álvaro Ibáñez from Madrid, Spain / CC BY (https://creativecommons.org/licenses/by/2.0)

José Meijer on Thérèse Schets' retirement

Tamara Herman — 2020-04-07T23:44:52Z

José Meijer, Vice-President Board of Trustees ABP and Chair of the CWC Trustee Leadership Network, pays tribute to Thérèse Schets, who retired after representing the Dutch Union Federation (FNV) on the CWC Networked Secretariat.

On March 7th 2020, Thérèse Schets retired. On that same day, she was going to pick up a new small camper. She planned to make some nice trips with her husband all over Europe.

I am afraid that she has not gone anywhere yet. The corona-crisis has hit Europe hard since then.

Therese said goodbye to us with a symposium in the union building De Burcht in Amsterdam on March 4th. We had a very nice afternoon and evening reception where we listened to different speakers who told us about Just Transition. In that way, Thérèse showed us that from working life to retirement, we need a Just Transition framework to apply to not only climate change, but digitalization and respecting natural resources.

Nick Robins, David Wood, Xander den Uyl made contributions. Sam Smith from the ITUC and Tuur Elsinga, Chair of CWC paid their respect to the Just Transition and to Thérèse.

Thérèse Schets worked for Shell as a chemist analyst. It was here that she learned how important it was for female workers to organise themselves and to make sure that their voices were heard at the highest levels of the union. Since that time, this energy never left her. For the past 5 years, she dedicated that energy to the CWC.

As a previous treasurer of the FNV and a pension fund trustee at the fund for cleaners, Therese never stopped telling us how important it is to make workers' money (pension fund capital) work for workers. She kept telling us that we really should pay more attention to the S in ESG.

Thérèse never grew tired of talking about her important work for the Committee on Workers Capital. She was, in many ways, the heart of the CWC.

Therese was very active in the Dutch pension fund world, where she wrote all kinds of guidelines to help the average trustee bring union work into pension fund practice. She worked with all kinds of researchers to make the union agenda more common.

Thérèse worked as a policy-secretary for the Dutch CWC chair. They depended on her for well written policies and her colleagues depended on her travel-apps when they went to Berlin, Paris or San Francisco for the annual CWC Conferences and PRI. Which bus do we have to take? Can you tell me where to buy this or that? Where can we meet each other? We were grateful for her very thoughtful way of including us all.

Thérèse - you were a resource for the CWC policy work, a wonderful colleague and your dedication inspired us.

We are sorry that you had to retire. Thank you for all your good work and your ongoing commitment to a good cause.

By José Meijer

Asset Manager Accountability in Action: First Super puts Orbis Investment Advisory on watch over ESG concerns at XPO Logistics

Tamara Herman — 2019-12-11T22:32:22Z

This week, the board of Australian superannuation fund First Super placed Orbis Investment Advisory on a watch list due to its poor investment stewardship at US-based XPO Logistics, Inc (NYSE: XPO).

Citing concerns that it is exposed to significant legal, regulatory and reputational risks in North America and Europe due to allegations of labour law and occupational health and safety violations at XPO, First Super announced that it was reconsidering its A$145.9 million mandate with Orbis.

Orbis is XPO Logistics' largest institutional shareholder, holding approximately 23 percent of the company's shares. It has voted consistently against recent CWC-supported shareholder resolutions at XPO that called for splitting the role of chairman from the chief executive officer, an annual sustainability report and a report on measures taken to prevent sexual harassment.

Importantly, First Super Chief Executive Bill Watson told the Sydney Morning Herald that the fund met with Orbis in London, Paris and San Francisco to demand that it either reduce its stake in XPO or engage with the company directly to address labour-related risks. The manager did not respond to the engagements in a way that satisfied the fund.

“This announcement should send a clear signal to Orbis and to other asset managers”, said ITUC General Secretary and CWC Leadership Team member Sharan Burrow. “The pension fund trustees around the world who oversee trillions of dollars in workers' retirement savings are no longer content with an asset manager that ticks the ESG boxes but fails to engage on meaningful change in cases where workers' rights are violated.”

First Super's announcement comes at a time when asset managers' stewardship practices are coming under growing scrutiny. Against a backdrop of a movement towards “responsible investment” branding in the industry, asset managers have been criticized for failing to reflect their commitments in their stewardship practices on issues such as the urgency of the transition to a low carbon economy.

The same scrutiny holds true for labour issues: the CWC Asset Manager Accountability Initiative is evaluating the stewardship practices and performance on social issues of global asset managers with a client base in its global trustee network. In 2019, groups of trustees met with State Street Global Advisors and UBS to raise specific workers' rights issues in their portfolios. More meetings with managers are planned for 2020 as the initiative expands.

“The initiative is growing because pension trustees around the world no longer accept that workers' retirement savings be invested in companies that weaken and undermine the rights of other workers”, said Paddy Crumlin, ITF President and CWC Co-Chair. Crumlin, who chairs the CWC Asset Manager Accountability Initiative added, “As the fiduciary duty of trustees has evolved to enable the incorporation of ESG issues, asset managers need to step up and recognize this new reality.”

A growing number of funds are signalling interest in using their watch lists to drive improvements in asset manager performance. The Seattle City Employees' Retirement System obtained a positive response when it placed BlackRock on a watch list in 2017 for its proxy voting record on climate, and the New York State Common Retirement Fund announced earlier this year that it will place managers who perform poorly on climate on watch lists. First Super is now sending a clear signal that asset managers can no longer discount client concerns and expectations when holding large ownership stakes in companies such as XPO where worker rights violations are rampant.

“XPO's underperformance can arguably be attributed to its poor governance and labour practices. It is an interesting case study to illustrate the proposition that firms who lag on ESG imperatives can often constitute a poor investment over the long term” said First Super in a news release.

Photo: Flickr | raymondclarkeimages

The 2019 CWC Workers' Capital Conference: Putting asset owners in the driver's seat

Hugues Letourneau — 2019-10-01T21:03:50Z

The theme of the 2019 CWC Workers' Capital Conference focused on a concern shared by trustees and trade union delegates from across the world: a need to improve accountability in the investment chain so that workers' deferred retirement savings are invested in a way that improves workers' lives in the present and in the future. In the spirit of moving our work from theory into action, the conference also created convening opportunities for focused meetings between CWC participating trustees, funds and their asset managers who were present at the PRI in Person.

The conference was held at two locations in Paris over two days, each providing a distinct but complementary set of perspectives on how the CWC's global network can be more effective.

The first day of the conference was generously hosted at AG2R LA MONDIALE in Paris. Opened by Francois-Marie Geslin of AG2R and CWC Chair Tuur Elzinga of FNV (Netherlands), it narrowed in on asset manager accountability to asset owners.

This focus is at the heart of the CWC's current workplan. Across funds and asset classes, trustees in our global network are intermediaries between the beneficiaries whose capital they are entrusted with and the financial industry. Upholding social standards in portfolio companies entails navigating the asset management industry.

In alternative investments, this task is often complicated by ownership and governance structures. Our session on alternative investments looked at how trustees, unions, funds and other actors have responded to some of these challenges by developing innovative tools. These include grading real estate managers on the quality of their responsible contractor policies, creating alternative private equity fund structures and developing labour rights policies.

Conference Keynote Speaker Ludovic Phalippou shed a critical light on fee structures in the private equity industry, providing an analysis that cuts through the noise of promised returns. Phalippou asserted that all pension funds – whether large or small – can invest in private markets. For smaller funds, this may entail investing in smaller assets such as minor lots of farmland. He conceded that being a small fund is disadvantageous and that consolidation with other funds should be pursued. He sees a continued trend toward increased allocations to private markets, the corollary of which is a reduction in the importance of public markets.

CWC co-chair and ITF President Paddy Crumlin opened an afternoon discussion on asset manager accountability, agreeing with Phalippou's insistence that asset owners must be in the drivers' seat. He set the tone for a focussed session on effective trustee and union strategies for raising social issues with asset managers. Participants took stock of the CWC Asset Manager Initiative, which involves producing report cards that assess asset manager performance on social issues and organizing constructive dialogues between the managers and their trustee clients. A theme throughout the discussion was the importance of trustee leadership, union input and strategic collaboration in scaling up this work.

The second day of the conference, organized with TUAC and held at the OECD Conference Center, zoomed out to explore policies and issues that present challenges and opportunities in building accountability for social issues in the investment chain more broadly. Following openings by Pierre Habbard, General Secretary of TUAC and Greg Medcraft of the OECD, the conference delved into frameworks that investors may draw on to perform their due diligence and embed workers' rights in the investment chain.

The discussion began by looking at how investors are implementing the only existing government-backed multilateral framework for human rights due diligence that provides access to remedy: the OECD Guidelines for Multinational Enterprises. We took stock of concrete progress in investor implementation of the Guidelines, including the Dutch Pension Fund Covenant and the French Duty of Vigilance Law, which UNI has used to engage investors on labour rights issues with French company Teleperformance.

The push towards mandated human rights due diligence in Europe is – paradoxically – occurring at a time when digitalized companies are growing in influence, transforming the world of work and challenging a wide spectrum of regulations established to protect workers' rights and social security. Two sessions examined disruptive business models and their implications for the stewardship of workers' capital. The first explored labour issues and platform economy companies, looking at both business model taxonomies and case studies from Australia and Switzerland. Trustees from three countries agreed that investors have yet to develop an effective ESG framework for assessing and addressing risks in non-conventional supply chains.

The second related session delved into the aggressive tax planning and corporate governance structures used by these firms. Here, we highlighted the push-back: tools and strategies that unions and investors are adopting in response, including input into the GRI Technical Committee on Tax, tools for improving tax transparency and union engagement with workers, communities and government.

Key to any discussion of digitalized business are the corporate governance structures that many adopt to minimize investor voice. A counter-point to this trend is the wave of discussions around a shift from “shareholder primacy” to “stakeholder capitalism.” Among the pragmatic steps proposed to achieve a shift in economic paradigms is increased worker voice in corporate governance. Examples and case studies from France, the United States and the UK provided insight and inspiration in what a shift towards an economic paradigm that fosters more equality may look like and how investors can support alternative corporate governance models.

The session ended with a discussion of another inevitable shift: the transition to a low-carbon economy. Unions and investors alike are striving to put the principles of a just transition in action by incorporating social issues into climate strategies and investing in low-carbon asset allocation opportunities that foster decent work. Here, participants heard concrete examples from Spain, where social dialogue is occurring to transition workers into new industries. The session ended with an update from the Investing in a Just Transition Project, which is entering a second phase to catalyse investor commitment to a just transition into action.

ITUC General Secretary Sharan Burrow offered closing remarks, stating that “future-proofing our funds is critical, but can no longer be on the basis of financial returns where they damage the economy with environmental risk and/or exploitation of workers.” Highlighting priority areas such as asset manager accountability, supporting trustees in exercising leadership, addressing aggressive tax planning and investor support for mandated due diligence, she reaffirmed the importance of global cooperation to align workers' capital with workers' interests: “If we cannot reorient our capital to ensure a lens of operation that reflects our values and consequently agreed standards with disclosure, backed by direct engagement and dialogue, then the funds themselves with the core of fiduciary responsibility are at risk.”

Take action:
• To express your interest in participating in the Asset Manager Accountability Initiative, click here
• To express your interest in participating in a working group on the digital economy and workers' capital, click here

The CWC Secretariat would like to thank AG2R LA MONDIALE for generously providing us with a venue for day one of the 2019 CWC Workers' Capital Conference and TUAC for organizing the second day at the OECD Conference Center. We would also like to thank ACSI and CorPath for their generous support for our reception.

Sharan Burrow: ESG - S and the E key

Tamara Herman — 2019-09-13T19:37:16Z

ITUC General Secretary Sharan Burrow's closing words at the 2019 CWC Workers' Capital Conference in Paris, France.

Decent work, sustainability and stabilising a global economy in crisis requires a reset of investment priorities, and the role of workers' capital through the pension funds is critical.

Rana Foorahar is my favorite financial journalist.

This week she takes on Starbucks as a metaphor for the health of corporate America.

She says:

“The money raised from new bond issuances is often used to pay for buybacks. Starbucks' own debt load has roughly tripled over the past few years as it has pivoted to what it calls a ‘more highly leveraged model'.”

“Starbucks is of course by no means alone in its employment of such financial engineering. One of the biggest market stories of the past several years has been corporations capitalising on cheap money, using record low rates to issue bonds and then using the money raised to buy back their own equity in order to bolster share prices.

“It's a shell game that has always made my head spin, particularly when done at a market peak, rather than a trough, which tells you that the strategy isn't a bet on a real, underlying growth story but an attempt to make headlines.

“I thought we'd reached a peak in such Faustian financial wizardry a while ago, but no. In recent days, Apple, which has $200bn dollars of cash or cash equivalents on hand, announced a $7bn bond offering, part of a slate of $54bn worth of corporate debt issuances in the past week or so. Just when you think the bond bubble can't get any bigger, it does.

“Given the looming risk of recession, a spate of recent corporate trouble (involving heavyweights such as GE, Kraft Heinz, Boeing, PG&E, and now Johnson & Johnson, which is under fire for its role in the opioid crisis), you would think investors might steer clear of even ‘high grade' corporate debt. But the asset class seems to fill an existential need for something between equities, which many worry could crash, and the glut of negative-yielding government bonds.”

Rana points out that corporate America is living on borrowed time in regard to risks of a crash, but they are by no means alone!

There is without doubt an overwhelming risk of a new economic crisis on the horizon, and this time it will be multifaceted.

Global growth has stalled if not stagnated. The IMF's global growth projection is now expected to be 3.2 per cent in 2019, and 3.5 per cent in 2020 – 0.1 per cent lower than April 2019 projections.

Trade wars in China and the US are unsurprisingly having a negative impact: In the second quarter of 2019, China's economy grew by 6.2%, which is the lowest growth figure since 1992. US growth fell from 3.1% in Q1-2019 to 2.1% in Q2-2019, and the US Federal Reserve is already trying early-response measures by lowering its interest rates, the first time since the 2008 crisis.

Brexit: After seven years of growth, the British economy contracted by 0.2% in Q2-2019. Analysts expect further contraction if the Brexit outcome results in a weak deal or no deal and more businesses relocate to continental Europe with supply chains cut. The pound is in almost 1-1 ratio with the Euro, and economic uncertainty is reinforced.

In Germany, industrial production dropped by 1.5% in June 2019 (month on month) while the continent also braces for 700,000 job losses in the event of a no-deal Brexit. In this case, the UK will lose half a million jobs.

Ballooning private (corporate) debt is frightening: UNCTAD's Trade and Development Report for 2018 warns of high debt levels. “By early 2018, global debt stocks had risen to nearly $250 trillion – three times global income – from $142 trillion a decade earlier. UNCTAD's most recent estimate is that the ratio of global debt to GDP is now nearly one third higher than in 2008.” Developing countries' private debt as a share of global debt stock increased from 7% in 2007 to 26% in 2017. Debt sustainability problems seem to be concentrated in non-financial corporations (companies that are not banks, insurance companies, etc.).

A recent OECD report finds historically low ratings for investment grade (safe) bonds and a prolonged decline in overall corporate bond quality. A recession now would make it more difficult for these companies to re-finance their debt.

Then we have an employment crisis. We have an employment crisis with high levels of unemployment, increasing numbers of young people and women excluded from the labour market and the breakdown in direct employment to the extent that 60% of the world's workers are now working in informal work including new platform businesses – no rights, no minimum wages, no social protection, no rule of law.

And there is a model of global trade that has generated a labour market crisis. Global supply chains are constructed on dehumanising exploitation – including modern slavery with forced and child labour. This requires domestic law and compliance, mandated due diligence for corporations and a global ILO standard. Employers and governments need to understand that this is vital for humanity but is also the floor of stabilising the risk to the global economy.

Further, we have a global wage crisis. Historic levels of inequality and a drop in income share is creating despair and anger, paralysing domestic markets and global growth. Sixty per cent of working families report that they are living on the edge, struggling to survive, and minimum wages for families in the majority of our nations are not living wages, with too many families living in poverty. Only minimum living wage mechanisms and strengthening collective bargaining will remedy this.

Multilateralism is in crisis, and this must be a front-of-house issue for pension funds charged with managing workers' capital.

We urgently need reform of multilateralism with a new floor for fair competition if the global economy is to find a stable path. Exploitation of workers with low-wage insecure work can no longer drive profits. Without labour rights and environmental standards, the floor competition is unfair and driving both a slump in demand and the call for national retreat. We want a seat at the table and we want third party access to take complaints to national and global courts/disputes panels. We need new or reformed legal structures regarding complaints against both governments and companies facilitating or practicing unfair trade practice. This applies to environmental standards as well as labour rights. Industry policy is key to climate action that requires a shift in energy, technology and behaviour if we are to both stabilise the planet and avoid green tariff borders.

The lack of a global response is staggering and in stark contrast to the 2008 crisis when the G20 leaders assumed joint responsibility.

Despite all these red flags, G7 leaders and G20 leaders meetings in the last few months failed to discuss the possibility of a multifaceted global crisis with any urgency or to lay any foundations for a response.

And the IMF continues to take a machete to the social contract and destroy demand with its austerity conditionality.

The point is not to depress you but to depict the context in which our strategic plan for the CWC priorities sit.

Future-proofing our funds is critical but can no longer be on the basis of financial returns where they damage the economy with environmental risk and/or exploitation of workers.

And I think the past two days have been really focused on the priorities that will help.

Asset Manager Accountability requires direct engagement by us with unions/trustees on the basis of exploitation of workers and/or denial of rights and safety. Through this engagement, ensuring due diligence based on the UN Guiding Principles on Business and Human Rights and developing a regular dialogue, and where necessary the grievance procedures to resolve exploitation, is central. Scaling up this work is an important strategy to support workers in dispute and to shift corporate strategy by having partnerships to shore up their due diligence.

Mandating due diligence is a global union demand, and we are optimistic this will happen across the EU in the first instance. The possibility of a binding UN global treaty for business and human rights will shift the legal framework, but in the meantime pushing the asset managers is critical.

We must continue to challenge and expose the deficit in responsibility and due diligence from the large asset managers. Blackrock is an example, and letters from the CEO are not enough when despite some response to publicity in the US, their shareholder resolution record is abysmal and they continue to invest in some of the most environmentally unsound companies with no public demands as well as turn a blind eye to labour exploitation.

And in Germany we heard of their attempt to weaken the co-determination model which is a backbone of stability with workers on company advisory boards. You can only ask why? For us this requires a solidarity response.

The questions of reporting and measurement vs direct action still raise their head. Of course we would be supportive of PRI aligning standards for reporting, as there are too many, they are too complex and none of them adequately expose abuse of core labour standards. Most are still relics of the CSR model that has failed to deliver. Direct engagement must lead to action that responds through due diligence and is backed up with grievance mechanisms at all levels. This is essential.

The frontline demand from us for Just Transition is both a guarantee of a secure future for workers and their communities, but it is also the basis of hope for workers and their families and therefore the confidence factor to back in high ambition for climate action, Aligning investor response to the climate crisis with the security we demand for workers and communities is urgent now, and the PRI/ITUC/Harvard/LSE Investor Brief is a good guide. We must continue to promote expansion of the funds signing on, but equally it is now important to put in place monitoring of funds and develop the case studies to promote best practice. For the unions and the CWC, we need to expose bad practice in funds/companies funded by pension funds.

Trustees sit at the heart of our effectiveness, and supporting them with the research and the narrative to drive the principled reforms we seek based on long-term investments must be a priority. With ESG, S is still the nasty relative you try to avoid inviting to the table. That must change.

And as we concluded on tax, it is an issue front and centre for unions and trustees. It is an imperative to clean up the crime of tax evasion, but it is also critical for repairing the tax base of nations and the guarantee of social protection and vital public services.

Fundraising for the CWC, deepening the partnership with PRI – both priorities for us.

But in all this work, workers must be at the centre. If we are not organising around these priorities and connecting the work with those it is designed to assist, then we are not growing the knowledge power of workers. We are in fact not leveraging our authority.

The call to reset the funds is not new. The ITUC has been promoting this since 2011, but if we cannot reorient our capital to ensure a lens of operation that reflects our values and consequently agreed standards with disclosure backed by direct engagement and dialogue, then the funds themselves with the core of fiduciary responsibility are at risk.

Thank you to the secretariat, to the leadership team – Tuur, Paddy, Liz and to Therese, who sadly for us plans to retire – and of course the ITUC, affiliate and GUF teams who make it possible.

Let's make 2019/20 our most activist and influential year yet.

Sharan Burrow

From Words to Action: CWC Asset Manager Accountability Initiative launches with meeting at State Street

Tamara Herman — 2019-06-21T16:56:05Z

The CWC Asset Manager Accountability Initiative supports trustees and unions in raising workers' issues with asset managers. We need your participation to build momentum, up to and beyond our 2019 conference in Paris. Click here or email the CWC Secretariat to find out more or get involved.

Equipped with a report card produced by the CWC that examined State Street Global Advisors' (SSGA) stewardship framework and practices, trustees from three Australian superannuation funds and the CWC Secretariat staff met with the asset manager at its Boston headquarters in early June.

SSGA has a tremendous voice in capital markets. It is the third largest asset manager in the world. Together, SSGA, BlackRock and Vanguard are the largest shareholders in over 40% of listed companies in the US.

A significant percentage of the money these asset managers invest is the deferred retirement savings of workers, accumulated in collectively funded schemes such as pensions and superannuation funds. Many of these funds are governed by boards that include worker-nominated and/or union-nominated members.

The worker-nominated trustees whose funds contract asset managers like SSGA have a unique and powerful role in capital markets. They sit at the top of the investment chain and oversee the retirement savings of millions of workers. Yet the asset managers they engage often invest workers' capital in a way that undermines workers' rights. This is where the CWC Asset Manager Accountability Initiative comes in.

The SSGA report card is the first in a series: The CWC Asset Manager Accountability Initiative is producing report cards to evaluate the stewardship performance of ten global asset managers headquartered across the world.

The idea behind the initiative is not to simply produce more paper: The CWC is engaging its global network of trustees to meet with the asset managers they contract to raise priority issues and build accountability.

At our meeting with SSGA, we raised concerns detailed in our SSGA report card regarding the absence of references to workers' human rights or labour standards in the company's responsible investment policies and stewardship activity reports.

The new R-Factor™ ESG data tool that SSGA has developed to guide its investment decision-making and stewardship work is based on SASB's materiality map, which identifies very few labour practices as a “material issue” and overlooks the responsibilities of companies under international norms and frameworks.

We explained that this reliance on SASB can make it difficult for investors to effectively assess whether workforce issues may compromise a company's long-term success. We suggested that adding workers' human rights indicators drawn from the CWC Guidelines for the Evaluation of Workers' Human Rights and Labour Standards and the Workforce Disclosure Initiative, which we encouraged SSGA to join, would allow SSGA to gain a clearer picture of a company's approach to labour and workforce issues.

A materiality-focused lens might explain SSGA's vote against shareholder resolutions that touch specifically on human rights due diligence, such as the proposal presented at Woolworth's Group Ltd 2018 annual general meeting (AGM). It may also explain why there is little evidence of engagements that touch workforce issues, workers' human rights and labour standards in SSGA's publicly-available stewardship reporting in 2017-2018.

SSGA told us that social issues such as labour and inequality are the “unexplored frontier” for the company and will be prioritized in 2019. They articulated an interest in addressing systemic issues such as taxation and inequality from an investor perspective, as stewardship expectations change.

We encouraged SSGA to supplement its materiality lens with a rights-based approach that is founded in key international standards and frameworks for protecting workers' human rights, such as the OECD Guidelines for Multinational Enterprises (MNEs) and the related responsibilities of institutional investors which clarifies expectations for minority shareholders.

Importantly, our meeting sends a signal that trustees in the CWC network, in exercising their fiduciary duty to take environmental, social and governance (ESG) issues into account, will be holding asset managers accountable. Re-affirming this accountability is an important step in transforming the global financial system so that the workers' whose savings are invested in global markets benefit fully – now and in the future.

As SSGA further defines its narrative on social issues, which is taking shape this year, we look forward to continued constructive engagement.

To participate in the CWC Asset Manager Accountability Initiative as a trustee or trade union representative, click here or email the CWC Secretariat. We will be sharing more information on the initiative at the 2019 CWC Workers' Capital Conference in Paris. Register now to join us.

Sharan Burrow: As Uber goes public, the fight against its broken business model continues

Tamara Herman — 2019-05-10T16:11:00Z

This piece was originally published on Equal Times

Uber markets itself as a “disruptive innovation” that is reconfiguring global transportation markets as it extends across countries and sectors.

The hallmark of platform businesses, Uber announced it would be going public this Friday in what was expected to be one of the largest IPOs in history. But the company, which has never been profitable, has already dropped its initial targeted valuation.

Behind Uber's veneer is a broken business model. Uber does not create jobs. Rather, it replaces jobs – opting to cut costs by using an enormous workforce of independent contractors who are not guaranteed wages, hours, benefits or social security.

Uber has taken a gamble, backed by venture capital, that these types of platform businesses will win acceptance even as they fail to obtain a social license to operate in many countries where they do business.

Investors are now deciding whether to bet on a company whose financial reportsreveal heavy losses and whose business model raises significant reputational, legal and regulatory risks.

It is simply a bad bet.

Uber faces the same obstacles to profitability as Lyft, its largest competitor, which issued its IPO in March and saw its shares plummet by 31% within weeks. Both companies' ridesharing revenue comes from commissions taken off passenger fares.

To profit, they must provide enough compensation to retain drivers, keep passenger fares low enough to undercut other transit choices, and deliver value to their investors.

This model gives Uber a very small margin for profit. Time and time again, the company has responded to the squeeze by reducing what drivers can earn rather than increasing what passengers must pay. But drivers have pushed back, organising drivers' guilds, city-wide work stoppages and class-action lawsuits across the world.

The bulk of these lawsuits have alleged that Uber misclassified drivers as independent contractors rather than employees. These misclassification suits have, at times, resulted in case law and rulings with deeper consequences for employment standards across the board.

Some courts have ruled in Uber's favour, with harmful implications for workers in and beyond the sectors it directly impacts. Other courts, though, have imposed extensive operational restrictions or outright banned the company and its rideshare competitors. Just this week, a judgement by a Swiss court opened the way for Uber drivers to be recognised as employees instead of the sham “independent contractor” status that they are forced to accept by the company.

In 2017, the highest court in the EU issued a substantial blow, classifying Uber as a transport service and stripping away protections against national regulation that came with its previous classification as a digital service. All eyes are now on California – one of Uber's significant markets – where legislation based on a Supreme Court ruling that narrows the definition of contractors is moving through the legislature, with significant potential implications for rideshare drivers.

Taxi drivers have also pushed back against Uber, organising strikes and working with communities to push governments to restrict ridesharing. Regulations barring some of Uber's ridesharing services or imposing significant operational restrictions have been adopted in key markets, including Argentina, Germany, Italy, Japan, South Korea, and Spain. In 2018, New York City became the first jurisdiction in the US to impose a rate structure for for-hire drivers – responding, in part, to a wave of taxi driver suicides attributed to the spread of ridesharing.

All of this has been bad press for Uber, which has also faced sexual harassment lawsuits, gender discrimination allegations, corporate governance scandals and taxi driver strikes over the years. Yet, it does not appear to have made any impact. In short, despite a generous influx of private investment, an impressive lobbying effort and substantial legal costs, the company is still struggling both to generate revenue and win its social license to operate.

As a publicly listed company, Uber will have to maintain growth and show movement towards profitability to convince investors of its value. This can only be bad news for workers. In its IPO prospectus, the company states outright : "as we aim to reduce Driver incentives to improve our financial performance, we expect Driver dissatisfaction will generally increase."

Uber is both an emblem of and a vector for the new platform business models. It has played a key role in establishing a model founded on the disruption of employment relationships. Yet it has not disrupted the transportation market enough to generate sufficient revenue on its rideshare services. The resistance it has faced from drivers, workers and communities has been pivotal in setting obstacles in Uber's path to profitability.

The international trade union movement has been fighting Uber's business model and organising to uphold workers' rights.

As Uber transitions from a private company to one whose shares will be bought and sold on the New York Stock Exchange, the ITUC will continue to stand up for the rights of drivers to stable wages, regular hours, benefits, social security and all the other things that any decent employer should provide to the workers who are, after all, what keeps any company afloat.

Photo: Unsplash | Victor Xok

Opinion: Debates in Australia about superannuation funds raising labour practices at BHP are 15 years behind

Tamara Herman — 2019-04-09T17:40:03Z

On March 3, Australian Treasurer Josh Frydenberg wrote a letter to the national prudential authority about the Australian Council of Trade Unions' request that superannuation funds engage mining giant BHP on a pressing labour issue.

"In disregard for the law, militant unions are acting like big brother”, he wrote, “brazenly pushing their industrial relations agenda to pressure superannuation funds to use their influence over company management and boards."

The superannuation funds to which Mr. Frydenberg is referring are comprised of workers' deferred wages. The funds are governed by boards of directors whose trustee members are appointed, separately, by the unions and employers who back the superannuation fund. The trustees' responsibilities to their beneficiaries are enshrined in trust law, which obliges them to act in the best interests of fund members.

This, according to Frydenberg, is the issue: union-appointed superannuation trustees' requests that their funds engage with BHP is, according to the treasurer, a contravention of their fiduciary duty to make investment decisions in the best interest of beneficiaries.

The assumption behind Frydenberg's argument is that incorporating environmental, social and governance (ESG) considerations into investment decision-making is not in the best interest of beneficiaries. This viewpoint of fiduciary duty, however is inconsistent with the most recent academic research, which demonstrates that ESG issues are in fact material and therefore relevant considerations for investors.

Among these is a review of 2,000 academic studies from the University of Hamburg and Deutsche Asset Management indicating a positive correlation between ESG strategies and strong financial performance and an Arabesque Asset Management and Oxford University study that revealed that 88% of research indicates that strong ESG practices result in better operational performances for companies.

Frydenberg's argument is also at odds with the latest legal opinions on fiduciary duty and ESG considerations that have emerged from leading international law firms. For example, Freshfields Bruckhaus Deringer was commissioned by the United Nations Environment Programme Finance Initiative to write a report on the legal framework surrounding institutional investment and environmental, social and governance considerations. The Freshfields report concluded that these issues can be material to a company's performance and their consideration is therefore “clearly permissible and is arguably required.”

In the wake of Freshfields, the UN established the Principles for Responsible Investment (PRI), a global network of investors committed to implementing six principles related to the incorporation of ESG into investments. It now has 2,300 signatories, which include essentially every large asset manager and pension fund in the world, with around $80 trillion in assets under management in total. The 141 Australian signatories include AustralianSuper, HESTA Super Fund and UniSuper. Meanwhile, a growing number of jurisdictions across the world have developed regulations and codes requiring institutional investors to embed ESG considerations into their decision-making processes.

In other words, responsible investment is no longer on the periphery.

There are, however, challenges. Though the growth in responsible investment globally along with emerging academic evidence demonstrates that the conceptions of materiality and fiduciary duty are shifting, national regulations in many jurisdictions have not kept pace sufficiently. Investors are now seeking clarity from national regulators on the consideration of ESG issues as part of their fiduciary duty obligations. For example, a report produced by the PRI on Australia recommended that the Australian Prudential Regulation Authority (APRA) clarify to superannuation funds that ESG issues are material to risk and return analysis and that stewardship expectations be formalized in a stewardship code.

Let's return to Frydenberg's argument that superannuation funds engaging a company on a labour issue is a contravention of its legal obligations to beneficiaries. Specifically, in Australia, Section 62 of the Superannuation Industry (Supervision) Act requires the fund to be maintained solely for the provision of benefits for each member of the fund on retirement (known as the ‘sole purpose test').

The request put to superannuation funds by ACTU was that they assess BHP's ESG performance and investment risk profile against the funds' investment policies – many of which include ESG or sustainability standards and engage the company accordingly.

The issue of concern was BHP's decision to remove two locally-crewed ships, where 70 workers and their families benefited from decent work conditions protected by collective agreements, with Flight-of-Convenience ships where crews receive wages as low as $2 per hour, as documented in a 2016 Parliament of Australia report.

Poor labour practices and the high levels of precarious work associated with low wages can generate risk for investors and costs for communities. A US National Commission investigation into BP Deepwater Horizon oil spill, for example, which cost the company $65 billion in legal and clean-up costs, found that cost-saving measures related to employees contributed to BP's inability to manage risk and safety. These included inadequate attention to employee qualifications and training, as well as insufficient communications between personnel in the supply chain.

In the fallout of the BP disaster, the Rotman International Journal of Pension Management published an article on the role that long-term institutional investors can play in preventing “surprises.” Among them is their role in encouraging boards to ensure that ESG standards are at the core of company operations in areas such as supply chain management and relations with workers.

Given the losses BP shareholders faced in the wake of the disaster, it could easily be argued that investor engagement on ESG practices related to labour in the supply change would have been in the interests of the members of pension funds invested in the company. And – in the case of BHP in Australia – it is perfectly reasonable to expect investors to engage on social issues, as part of their fiduciary duty, based on sound assumptions and within a rigorous process.

Tamara Herman is Senior Program Officer at the Global Unions' Committee on Workers' Capital.

Photo by md jehan| Unsplash