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
