A group of investors representing over $1 trillion in assets under management has published a letter to the IFRS Foundation’s International Sustainability Standards Board (ISSB), urging it to prioritize the development of global reporting standards for companies to disclose on human capital and human rights.
The ISSB was launched in November 2021 at the COP26 climate conference, with the goal to develop IFRS Sustainability Disclosure Standards, driven by demand from investors, companies, governments and regulators to provide a global baseline of disclosure requirements enabling a consistent understanding of the effect of sustainability risks and opportunities on companies’ prospects.
The ISSB published its first set of climate and sustainability reporting standards in June 2023, and recently launched a Request for Information (RFI) asking for feedback on priorities for its next two-year work plan, outlining four potential projects including biodiversity, ecosystems and ecosystem services; human capital; human rights, and; a research project on integration of sustainability information in financial reporting.
The letter, signed by 24 asset manager and asset owners across several countries, and coordinated by responsible investment NGO ShareAction, was sent in response to the ISSB’s RFI, and urges the board “to prioritise researching human capital and human rights disclosure standards,” noting that investor demand for workforce data and related issues has reached “an all-time high,” particularly as companies are being impacted by “growing resignation numbers, layoffs, and stalling labour market recoveries following the COVID-19 pandemic.”
The letter stated:
“It is imperative the ISSB prioritises human capital and human rights in its upcoming workplan. The financial materiality of human capital and human rights-related topics – and the critical role of human rights due diligence in identifying business risks – has never been clearer.”
The letter also called on the ISSB to integrate its projects on human capital and human rights, which were presented as separate topics in the RFI, arguing that companies and investors treat the topics as related areas in practice, with human rights due diligence used as key tools for identifying labor issues, and several areas of crossover existing, such as unionization and diversity and inclusion.
“To effectively meet this demand,” the letter stated, “this group calls on the ISSB to embark upon a joint research project which will serve to provide market clarity on how to consider and disclose human capital and human rights information as a whole.”
James Coldwell, Head of the Workforce Disclosure Initiative (WDI) at ShareAction said:
“We know that workers around the world face exploitation by unscrupulous companies, harming the workers themselves and creating risks for investors. Tackling these issues can only be achieved when there is transparency around corporate practices – something the ISSB is perfectly positioned to deliver. This is why we’re calling on them to prioritise research into human capital and human rights, to develop a globally accepted reporting framework.”
Click here to access the letter and full list of signatories.