Committee on Workers' Capital

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

2019 CWC Conference: Important travel and event information

Tamara Herman — 2019-08-28T19:55:00Z

This page contains information on registration, the schedule and hotel options for the 2019 Workers' Capital Conference in Paris, France. Please note that this conference will take place in two different venues: The AG2R LaMondiale on Sunday, September 8 and the OECD Headquarters and Conference Centre on Monday, September 9.

Conference participants are invited to a networking dinner on Saturday, September 7. The morning of Sunday, September 8, we will hold a Trustee Leadership Workshop that is open to trustees. The conference itself begins the afternoon of Sunday, September 8.

Please keep checking this page for updates.

REGISTRATION

Registrations for the conference are now CLOSED.

Register for the Trustee Leadership Workshop (September 8 morning): Registration is open to all trustees and capped at 40 participants. There is a EUR150 registration fee. Please note that you do not have to register separately for the CWC Conference if you've registered for the trustee workshop.

AGENDA

This year's conference agenda will include sessions on:

Reclaiming the balance of power: How trustees and unions are holding asset managers accountable
Investor responses to digitalisation and the future of work
Changing the rules: State-based frameworks to hold investors accountable on social issues
Good jobs on a living planet: Progress on the Just Transition to a low-carbon economy
Tax avoidance: how are changes in the regulatory and transparency landscapes creating risks and opportunities for responsible investors?
Workers' rights in alternative asset portfolios
Innovations around fee transparency in the investment chain

See the latest draft agenda here

See the Trustee Leadership Workshop agenda here

SATURDAY, SEPTEMBER 7
Radioeat: Restaurant de la maison de radio
1er étage Galerie Seine - Radio France, 116 avenue du président Kennedy 75016 Paris
Click here for map

Networking dinner
19:00 - 21:00

Participants will be asked to pre-pay to take part in the optional networking dinner when registering for the conference. While we encourage you to pre-pay online, you will have the option to make an offline payment. The cost is 50 EUR per person, which includes an appetizer, entrée, desert, a glass of wine and coffee.

SUNDAY, SEPTEMBER 8
AG2R LaMondiale
104, boulevard Haussmann 75008 Paris
Click here for map

Trustee Leadership Workshop
9:30 - 12:00

Please note that this event is for trustees only
The agenda is live at this link

Workers' Capital Conference
13:00 - 17:30

This event is open to all trade union delegates and trustees

Keynote Speaker: Ludovic Phalippou

Reception
17:30 - 19:00

MONDAY, SEPTEMBER 9
OECD Headquarters and Conference Centre
2, rue André Pascal 75016 Paris
Click here for map

Workers' Capital Conference
8:30 - 17:00

HOTELS

Conference participants are responsible for arranging their own hotel bookings. For your convenience, we are pleased to share with you a list of hotels in Paris offering preferential rates to OECD visitors, courtesy of TUAC. We encourage you to make your reservation as soon as possible as the rooms are filling up.

Photo: Pixabay | edmondlafoto

2019 CWC Trustee Leadership Workshop

Tamara Herman — 2019-08-27T18:56:34Z

The agenda for the 2019 CWC Trustee Leadership Workshop is available here.

Session Moderators:

Hugues Létourneau, Manager, Global Unions Committee on Workers' Capital
David Wood, Director, Initiative for Responsible Investment at the Hauser Institute for Civil Society, Center for Public Leadership, at the Harvard Kennedy School of Government

Topics include:

Organising and empowering trustees to improve capital stewardship in their fund portfolios
Strategic actions for trustees: building a movement to push asset managers from talk to action

The workshop has been developed in collaboration with SHARE and the Initiative for Responsible Investment at the Hauser Institute for Civil Society, Center for Public Leadership, at the Harvard Kennedy School of Government.

To register, click here. Registration will be capped at 40 participants.

Photo: AhmadArdity | pixabay

2019 CWC Conference Agenda

Tamara Herman — 2019-07-31T19:11:00Z

The 2019 CWC Workers' Capital Conference draft agenda is live. Please continue to check back regularly as the agenda is updated.
The agenda is available here.
The agenda for the Trustee Leadership Workshop is available here.
Photo: Pixabay | edmondlafoto

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Save the date: 2019 CWC Conference

Tamara Herman — 2019-02-20T00:05:49Z

We are pleased to announce that the 2019 Workers' Capital Conference will be held in Paris, France on Sunday, September 8th and Monday, September 9th 2019.
The conference will precede the PRI in Person, which will take place from September 10-12, 2019 in Paris.
We would like to thank AG2R LaMondiale for hosting us on Sunday, September 8th and the OECD for hosting us on Monday, September 9th.
More information will be available soon.
Photo: Pixabay | (...)

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