Industry Updates

UN working group calls for passive funds to greater impact human rights

In line with the UN’s Guiding Principles on Business and Human Rights

Lauren Gibbons

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A report published by a United Nations working group has highlighted the need for passive funds to integrate human rights objectives into their construction.

The report – published this week by the UN Working Group on Business and Human Rights – called for investors in index tracking funds to engage with index providers to do more on human rights.

“Investors in passively managed indexed funds could use their leverage to engage with index providers so that the responsibility to respect human rights is better reflected in the construction of indices or investee engagement,” the report said.

“For instance, large asset managers, which can vote in shareholder meetings and can request meetings with senior management on issues of concern can, by virtue of their large size, have significant influence.”

The report aims to clarify the responsibility of investors to “respect” human rights in line with the UN’s Guiding Principles (UNGP) on Business and Human Rights (UNGPs).

UNGP is a framework of 31 principles that define the duties and responsibilities of governments and businesses concerning human rights abuses.

The dominance of the ‘Big Three’ US fund giants BlackRock, Vanguard and State Street Global Advisors has long been a concern, with the three firms major shareholders in 95% of S&P 500 companies.

In February, BlackRock expanded its voting choice for its largest ETF – the iShares Core S&P 500 ETF – to millions of retail investors.

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