In recent years, increasingly-frequent extreme-weather phenomena have put climate change at the heart of media, discussions, debates, etc. The environmental shift has also become a concern for investors. These phenomena are often linked to human tragedies and therefore go beyond the purely environmental dimension. Nevertheless, in terms of regulatory- and moral obligations, both the climate and environmental responsibility have taken precedence over other issues, particularly social issues. Fortunately, they never completely replaced them.
A quick look at the latest regulatory and voluntary developments highlights the importance of investor responsibility in relation to climate change: France’s Article 173 discusses the involvement of investors in the energy transition to a low-carbon economy; the European Commission’s taxonomy, which focuses on two purely environmental objectives; the European regulation of low-carbon benchmarks; the Climate Action 100+ group, which brings together more than 450 investors, representing more than USD 40 trillion in assets under management; the initiative of central banks and global supervisory authorities (NGFS), which recognizes carbon risk as a formal part of their responsibility; etc.
It would be unfair to claim that social issues are no longer part of investors’ concerns and obligations. The European Commission has already announced that it will look into a taxonomy on social issues in a second phase. In addition, several regulations -such as the duty of vigilance in France, or the act on modern slavery in the United Kingdom- have focused on social issues along supply chains (e.g. the Rana Plaza drama in Bangladesh). Most recently Mr. D. Reynders, European Commissioner for Justice, has raised the possibility of a fiduciary duty for companies, cementing their responsibility to defend human rights. The Rana Plaza scandals in the textile sector, the violations of communal rights in huge infrastructure projects, or child labour have been at the heart of responsible and ethical investors’ concerns. Nevertheless, the pandemic and the subsequent health crisis have pulled the social factor back to the forefront, with a strong focus on the human aspect. Sustainable and responsible investment has always taken social factors into account. However, their importance (and therefore their weight in evaluation grids) has varied from one sector to another. As such, sustainable and responsible investment mostly focused on subcontractors and talent management instead of the primary issue of security and prevention of human capital. Could it be that labour laws, which are very thorough in developed economies, have obscured that the primary force of a sustainable company is its human capital?
Environmental experts have spoken out: the contamination of the COVID-19 virus from animals to humans is caused by the massive and rapid deterioration of our biodiversity. It goes to show how closely environmental and human issues are intertwined. This interconnection has long been highlighted by the World Economic Forum in its annual risk report.
