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

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

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.