Schroders, Wespath and Heartland Release Framework for Conducting Human Rights Due Diligence
Schroders, a global asset manager, in collaboration with Wespath Benefits and Investments, a U.S.-based non-profit benefits and investments provider, and Heartland Initiative, a nonprofit investor advisory, released today a collaborative white paper that outlines the intersection between human rights and material financial risks.
The white paper discusses how corporate proximity to human rights violations can result in financial costs for companies, leading to significant potential risks for shareholders. The findings outline how institutional investors can navigate and identify the intersection of these risks, referred to as the “saliency-materiality nexus,” particularly as it relates to corporate proximity to human rights harms in conflict-affected and high-risk areas (CAHRA).
The white paper’s findings are summarized in three sections, including:
• Investor challenges: Investors face significant challenges in identifying widespread and diverse human rights impacts across value chains, lack fit-for-purpose data on corporate proximity to impacts, and rely on under-resourced staff to interpret available information. These challenges limit investors’ ability to fulfill their responsibilities to beneficiaries, clients, fund mandates, emerging due diligence legislation, and at-risk populations.
• Saliency-materiality nexus: The nexus framework identifies the intersection where a company’s connection to human rights impacts in CAHRA can result in financially material risks, including regulatory, legal, operational, and reputational.
• Nexus in practice: Using the nexus framework can focus investor due diligence on the most severe human rights and material risks across portfolios, helping investors fulfill their fiduciary duties and sustainability obligations.
On the white paper’s release, Schroders commented, “As we are forced to navigate an increasing level of global conflict, we aim to deliver on our role as a fiduciary by advising institutional investors on the complexities of the opportunities and potential challenges posed by today’s investment landscape. The framework provided by the saliency-materiality nexus arms us and institutions with clear, measurable data that is integral to pressure test and manage regional risks and invest with more confidence. The ability to identify, engage on, and better manage financially material risks in portfolios furthers our efforts to preserve or enhance shareholder value for our clients.”
Wespath added, “As one of the largest faith-based pension funds in the world, Wespath has a long-standing commitment to sustainable and responsible investment that supports the goals of our participants and investors. We believe that, in order to preserve the healthy economic conditions upon which long-term financial returns rely, we must support a transition to a sustainable global economy. The prudent management of human rights risks, particularly in CAHRA, is crucial to that effort, and frameworks like the saliency-materiality nexus will help improve and evolve those risk management capabilities.”
Heartland stated, “Geopolitical conflicts and authoritarianism are on the rise, and global freedom has decreased for the 16th consecutive year. The World Bank predicts that by 2030, two-thirds of the world’s poor will be living in fragile and conflict-affected conditions. As global violence and instability increase, along with the introduction of mandatory due diligence laws and the inadequacy of current social risk data, investors face unprecedented challenges in managing human rights and material risks. To address these issues, we developed the saliency-materiality nexus—an actionable, values-driven framework designed to help investors pinpoint the most critical and systemic risks to both people and portfolios in an increasingly volatile environment.”
More information about the research and its findings can be found here.
It is a direct response to challenges faced by investors: increased conflict and fragility, increased mandatory due diligence legislation, a lack of adequate data and analysis on social risks, and resource constrained investment staff confronted with growing client demands, reporting requirements, and social issues.
For further information, please contact:
Schroders
Jennifer Manser
Jennifer.Manser@Schroders.com
+1 (212) 632-2947
Bridget Coffey
Pro-schroders@prosek.com
Wespath
Julie Capozzi
jcapozzi@wespath.org
(847) 866-4111
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About Schroders
Schroders is a global investment manager that provides active asset management, wealth management and investment solutions, with $978.1 billion of assets under management as of 30 June 2024. As a UK-listed FTSE100 company, Schroders has a market capitalisation of circa £6 billion and over 6,000 employees across 38 locations. Established in 1804, Schroders remains true to its roots as a family-founded business. The Schroder family continues to be a significant shareholder, holding approximately 44% of the issued share capital.
Schroders' success can be attributed to its diversified business model, spanning different asset classes, client types and geographies. The company offers innovative products and solutions through four core business divisions: Public Markets, Solutions, Wealth Management, and Schroders Capital, which focuses on private markets, including private equity, renewable infrastructure investing, private debt & credit alternatives, and real estate.
Schroders aims to provide excellent investment performance to clients through active management. This means directing capital towards resilient businesses with sustainable business models, consistently with the investment goals of its clients. Schroders serves a diverse client base that includes pension schemes, insurance companies, sovereign wealth funds, endowments, foundations, high net worth individuals, family offices, as well as end clients through partnerships with distributors, financial advisers, and online platforms.
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About Wespath
Wespath Benefits and Investments (Wespath) is a not-for-profit organization that has been serving The United Methodist Church (UMC) for over a century. In accordance with its fiduciary duties, Wespath administers benefit plans and, together with its subsidiaries, including Wespath Institutional Investments, invests nearly $26 billion in assets on behalf of over 100,000 participants and over 150 United Methodist institutions (as of December 31, 2023). Wespath invests in a sustainable manner that seeks to achieve strong investment returns in alignment with positive social and environmental impacts. Wespath maintains one of the largest reporting faith-based pension funds in the world. For additional information about Wespath Benefits and Investments, please follow Wespath on X (formerly Twitter), Facebook, Instagram, LinkedIn and YouTube.
About Heartland Initiative
Heartland Initiative is at the forefront of transforming how investors engage with and advance human rights in a complex and ever-changing global landscape. As a mission-driven, nonprofit organization headquartered in the United States, Heartland is dedicated to addressing the intersection of human rights and material risks within investment portfolios. In a world where investments cross borders and industries, Heartland drives systemic change through strategic peer learning and collaborative efforts involving investors, civil society organizations, companies, and policymakers. For additional information, please follow Heartland on LinkedIn.
Important Information: All investments involve risk, including the loss of principal. The views and opinions contained herein are those of the author(s) and the entities quoted and are subject to change. This communication is intended to be for information purposes only and it is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for accounting, legal or tax advice, or investment recommendations. Information herein has been obtained from sources we believe to be reliable but neither Schroders, Wespath or Heartland Initiative warrant its completeness or accuracy. No responsibility can be accepted for errors of facts obtained from third parties. Reliance should not be placed on the views and information in the document when making individual investment and/or strategic decisions. Schroders, Wespath or Heartland Initiative are not affiliated entities.
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Important information
The views and opinions contained herein are those of Schroders’ investment teams and/or Economics Group, and do not necessarily represent Schroder Investment Management North America Inc.’s house views. These views are subject to change. This information is intended to be for information purposes only and it is not intended as promotional material in any respect.