Taskforce on Sustainability Ratings

As purveyors of sustainability research, ratings and indices that are utilised by asset owners and managers, rating agencies play an important role in shaping the demands placed on companies regarding sustainability disclosures and practice. The CWC Taskforce on Sustainability Ratings is composed of trade union representatives who are experts on matters of social sustainability and responsible investment. The Taskforce believes that sustainability rating agencies are well-positioned to play a role in improving the level and quality of social indicators that are factored into investment decision making.

On June 9 2016, the CWC Taskforce on Sustainability Ratings met for a dialogue with a group of sustainability rating agencies in Amsterdam to discuss the Set of Guidelines for the Evaluation of Workers' Human Rights and Labour Standards that it developed. The Guidelines are meant to improve the methodology and indicators used by agencies in order to provide accurate snapshots of company strategy on the provision of decent working conditions and workforce empowerment - factors that are tied to long-term performance.

The work of the Taskforce comes at a time when rating agencies play an increasingly important role in investment chains; an increasing number of asset owners and managers integrate sustainability research, benchmarks and indices provided by these agencies.  

The salient topics discussed during the Dialogue included: 

  • Key metrics on workforce composition, social dialogue and supply chain due diligence to assess  company commitment and performance on decent work;  
  • The types of events that would cause a downgrade/upgrade in a company's sustainability score;
  • The subjectivity in weighting out E, S and G factors to come up with a single score in light of uneven reporting (social/labour issues generally suffer from weaker reporting relative to environmental reporting; reporting varies across countries);  
  • Challenges faced by agencies in isolating material ESG indicators and balancing those with company responsibilities under international frameworks, norms and guidelines; 
  • The importance for asset owners & pension trustees to ask questions around agency methodology prior to entering into client relationships with sustainability agencies.

The one day event was attended by the following agencies:

  • Sustainalytics
  • RobecoSAM
  • MSCI
  • Vigeo-Eiris
  • Oekom Research
  • FTSE
  • Solaron
  • ISS-Ethix

The Taskforce on Sustainability Ratings is made up of representatives from the TUC (UK), Comisiones Obreras (Spain), UFCW, UNI/IndustriALL, Maritime Union of Australia, ITF and ITUC . The Dialogue was also attended by pension trustees from France and Australia.   

Over the next year, the Taskforce will a) pursue its engagement with rating agencies and b) collaborate closely with pension boards to drive improvements in the integration of social issues in the work of rating agencies. The larger objective is to improve the signals that are sent to companies via investment chains (eg: company position in an index) regarding their management of workers' human rights and labour standards.

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