oecd responsible business conduct for institutional investors

practical application of effective due diligence systems challenging. Further development on climate-related disclosure are being considered as well for the next phase. According to research from Bloomberg Intelligence, so far in 2020, 59% of U.S. ESG ETFs are doing better than the S&P 500 Index while 60% of European ESG ETFs have beat the MSCI Europe Index. In this respect, a 2018 ShareAction study of the worlds 100 largest pension funds found that 60% of funds have little or no approach to environmental risks. For example, Australian investors are subject to the Australian Modern Slavery Act. Examples of RBC integration in key sustainable finance regulations, RBC referenced in international standards and initiatives on sustainable finance. OECD (2020a), COVID-19 and Responsible Business Conduct, https://read.oecd-ilibrary.org/view/?ref=129_129619-6upr496iui&title=COVID-19-and-Responsible-Business-Conduct. For example, the recommendations outlined in the OECD paper on Responsible Business Conduct for Institutional Investors have been endorsed by leading investment managers5, pension funds,6 and recently referenced in an EU Regulation for Sustainable Disclosure, which calls on the EU institutional investors and other financial market participants to report on their due diligence processes. Additionally, the policy guidance for SOEs should be aligned with the 2015 OECD Guidelines on Corporate Governance of State-Owned Enterprises and the specific expectation that SOEs establish and implement due diligence according to international standards should be made clear. Governments are also increasingly inclined to exploit the scale of assets and leverage of financial institutions to support global sustainability objectives. Strong cooperation with China is also strengthening Thailands role in the implementation of the Master Plan on ASEAN Connectivity 2025. For example, international organisations and academics have expressed concerns about the understudied environmental and occupational health and safety impacts associated with high-tech and the electronics industry. These impacts can also spill over and affect the perceptions of investors that are considering Thailand as an investment destination on its own. OHCHR has cautioned that without explicitly and systematically acknowledging and addressing human rights in infrastructure policy frameworks and practices, at best the enormous potential of infrastructure as a facilitator for the SDGs will not be realised, and at worst infrastructure development will actually undermine the SDGs. The role of SETs Social Responsibility Centre is relevant in this regard. AIMA (2018), ESG Integration on the Rise: And how to implement it in your portfolio, www.aima.org/journal/aima-journal-edition-114/article/esg-integration-on-the-rise-and-how-to-implement-it-in-your-portfolio.html. Thailands ambitions to be a regional leader could be particularly impactful in the context of this sector. An important policy objective by the government is to enhance investment in green technologies and renewable energy (see Chapter 10). A number of SDGs refer to responsible production patterns, inclusive and sustainable economic growth, employment and decent work for all. RBC due diligence should be promoted as a standard operating procedure as a way to identify and address more significant impacts on the communities and the environment. The direction that the government has set on RBC for SOEs is an important move in the market, considering the importance of Thai SOEs. 9 as the relevant international standard. Implementing RBC principles and standards can help companies operationalise the SDGs and ensure their most significant impacts are prioritised (for more information, see OECD, 2019c). For example, Blackrock, NBIM, APG were key partners in developing the paper. The SET publishes a list of Thai companies since 2015 that have a strong performance on ESG and also awards an annual sustainability award. Assess whether further alignment in risk management policies is necessary and whether specific due diligence requirements should be considered. Clear information on the UN Guiding Principles and the OECD Guidelines should be communicated as part of the services that the Federation of Thai Industries and the Board of Trade provide for outward investments. This move has been welcomed by the UN Working Group on Business and Human Rights (UN OHCHR, 2018a). 5. Promoting and enabling responsible business conduct | OECD The OECD Due Diligence Guidance for Responsible Supply Chains in the Garment and Footwear Sector recognises that purchasing practices of retailers, brands and their buying intermediaries have been demonstrated to contribute to harmful impacts such as excessive and forced overtime and low wages in some cases. This can help promote RBC among Thai banks and foreign banks operating in Thailand; although it would be advisable to also consider swift implementation. Thailand is likely to be severely affected by climate change, due to its extensive coastline, rural communities dependent on agriculture, and heavily populated urban areas located on flood prone areas. Explicitly promote broad dissemination and implementation of due diligence in accordance with the OECD Due Diligence Guidance for RBC. ILO found that, while there have been significant gains since 2017 and there is no doubt that practices in the sector have seen improvements (particularly when it comes to efforts by the government to strengthen the legal framework and elaborate a more comprehensive legal framework to manage labour migration), abuses in the fishing and seafood sectors persist, including circumstances of involuntary work and coercion, which are elements leading to forced labour. Ensure that recent protections for human rights defenders are implemented and consider whether further policy action is necessary. Please select the WEB or READ option instead (if available). Transparency International estimates that corruption is a bigger problem in construction than mining, real estate, energy or the arms market. The opposite trend holds in the US and Europe, with the respective numbers at USD 78 billion (2000-08) to USD 51 billion (2009-18). OECD/ITF (2017), ITF Transport Outlook 2017, OECD Publishing, Paris. Understanding, addressing, and avoiding risks material to business operations in a more comprehensive way that is, beyond financial risks can often lead to a competitive advantage. Promote due diligence in the activities where the state acts as an economic actor. Out of the 16 RCEP partners, ASEAN policymakers have already recognised the importance of RBC in certain policy areas. PDF Responsible business conduct for institutional investors - OECD For example, the improving the corporate governance practices of SOEs can help remove barriers for private investments, which is particularly important in priority sectors such as infrastructure. PDF THE UN PRINCIPLES FOR RESPONSIBLE INVESTMENT AND THE - OECD.org - OECD It is important to have both an issue-specific perspective but also cross-cutting topics rooted in risk-based due diligence and overall company policies (see OECD, 2020c). Promoting better business practices broadly and encouraging cross-sectoral learning, as mentioned in the previous section, can be beneficial. Similarly, the Thai government should assess whether its own business activities, including activities conducted in partnership with the private sector, contribute to mitigating climate change while respecting human rights, and ensuring effective remedies for climate and human rights harms. The Paris Agreement on climate change also underlines the critical role of business in tackling climate change, including through reducing greenhouse gas emissions and improving environmental performance. Some of these innovations are also found in ASEAN. PDF Towards Responsible Mineral Supply Chains - Oecd Over the last years, CSR is increasingly being used alongside RBC and business and human rights (BHR). ILO and Walk Free Foundation (2017), Global estimates of modern slavery: forced labour and forced marriage, https://www.ilo.org/global/publications/books/WCMS_575479/lang--en/index.htm. It also envisions an implementation plan and indicators for monitoring and evaluation. If workers, trade unions, civil society or whistle blowers cannot meaningfully engage, that has a chilling effect on such processes and solutions. This interdependence can mean that dealing with different legal and regulatory frameworks (including also when it comes to RBC) can be a challenging prospect. In addition to the health impact, entire supply chains have come to a halt and placed millions of companies and workers at economic risk (OECD, 2020a). Globally, construction ranks second only to domestic work for prevalence of forced labour, at 18% and 24% respectively (ILO and Walk Free Foundation, 2017). Investment performance is still generally measured and reported on a 1, 3 and 5-year horizons (Cappucci, 2017). The OECD paper Responsible business conduct for Institutional Investors explains key considerations for institutional investors in carrying out due diligence as recommended by the OECD Guidelines for Multinational Enterprises (OECD Guidelines). Responsible Business Conduct for Institutional Investors and Due Diligence for Responsible Corporate Lending and Securities Underwriting 40 5. The choice of these areas is not meant to be exclusive and is complementary to the Thai NAP. This insight comes from a diverse group of Southeast Asian agribusiness companies operating across the supply chain, with 82% of companies involved in cross-border trade, and it is particularly relevant to consider in the context of addressing cumulative impact of company operations and climate change. OECD (2012),OECD Environmental Outlook to 2050:The Consequences of Inaction, OECD Publishing, Paris,https://doi.org/10.1787/9789264122246-en. Thai Institute of Directors Association also promotes sustainability as part of its work programmes and promotion of good corporate governance and offers a Board of the Year Award with sustainability and stakeholder views included in the criteria. In this regard, the Rights and Liberties Protection Department of the Thai Ministry of Justice has highlighted the efforts by the Office of Court of Justice in 2019 on a new section 161/1 of the Criminal Procedure Code which is meant to provide the courts with the power to dismiss any criminal cases that appear to be driven by SLAPP. Among materials, only coal, oil and gas are a greater source of greenhouse gases; and mining of sand, without which concrete cannot be made, is reportedly increasingly controlled by organised crime groups (see The Guardian, 2019). 3 FOREWORD This paper, Responsible Business Conduct for Institutional Investors: Key Considerations for Due Diligence under the OECD Guidelines for Multinational Enterprises SEC (2019a), SEC and NHRC sign MOU designating cooperation for adoption of guiding principles on business and human rights to promote listed company competitiveness and sustainable growth, https://www.sec.or.th/EN/Pages/News_Detail.aspx?SECID=7497&NewsNo=64&NewsYear=2019&Lang=EN. See also Saijel KishanandEmily Chasan (13 March 2020), Older ESG Funds Outperform Their Newer Rivals in Market Tumult, Bloomberg https://www.bloomberg.com/news/articles/2020-03-13/older-esg-funds-outperform-their-newer-rivals-in-market-tumult?sref=winqcnxe and Jon Hale (16 March 2020), Sustainable Equity Funds are Outperforming in Bear Market, Morningstar https://www.morningstar.com/articles/972475/sustainable-equity-funds-are-outperforming-in-bear-market, 5. Evidence has already shown that companies that are responsible are better able to respond to COVID-19. The Policy Framework for Investment (PFI) - OECD.org "RBC and ESG terminology both relate to environmental, social and governance considerations, which drive and define sustainable finance approaches and activities.

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