Late last week, the United Nations (UN) completed a draft report on the responsibilities of ESG index providers and data providers in relation to human rights. The report comes in the wake of the UN Guiding Principles being expanded to include the financial sector. The draft report emphasizes the need for ESG index providers and data providers to uphold human rights and avoid complicity in human rights abuses. It underscores the importance of transparency, accountability, and due diligence within the ESG data industry. The report is expected to be released soon. [d17f619d]
This development highlights the growing recognition of the role that ESG index providers and data providers play in promoting human rights and responsible investing. As the demand for ESG information and indices continues to rise, there is a corresponding need for these providers to ensure that the data they provide is accurate, reliable, and aligned with human rights standards. The draft report serves as a reminder of the importance of ethical and responsible practices in the ESG industry. [d17f619d]
Monitoring the implementation of responsible business conduct standards across a company’s own operations and along the value chain can prove difficult. Many voluntary frameworks are now being incorporated into regulation at the national or regional level. Recent legislation in multiple jurisdictions has formally implemented the principles of responsible conduct contained in this lineage of frameworks and strengthened it with the force of law. The most comprehensive of these efforts, the Corporate Sustainability Reporting Directive (CSRD) in the EU, explicitly refers to the OECD Guidelines and the UN Global Compact Principles (UNCG) and Guiding Principles on Human Rights (GPHR) frameworks in requiring companies to disclose detailed information about sustainability policies and performance for all material topics. ISS ESG, the responsible investment arm of ISS STOXX, has been analyzing companies’ adherence to international norms for more than 20 years, building a comprehensive and ever-evolving database for general, sector-specific, and thematic standards for responsible business conduct, as well as reported controversies. ISS ESG tracks and assesses corporate behavior that may fail to respect international norms of business conduct through two separate but related datasets: Norm-Based Research and Newsroom. Norm-Based Research assesses potential violations of international norms, as well as how companies manage these controversies. Allegations are monitored through a variety of sources, including media, industry publications, governmental and inter-governmental agencies, NGOs, and trade unions. The full range of news articles from global sources is first processed by machine learning algorithms to identify articles that are potentially relevant to sustainability controversies. This smaller set of articles is then reviewed by ISS ESG analysts, who determine if each article is indeed relevant and then tag each one with metadata such as location, topical themes, and source information.
