A group of investors representing over $1 trillion in assets under management has issued a letter to the International Sustainability Standards Board (ISSB), urging it to prioritize the development of global reporting standards for companies to disclose information related to human capital and human rights. This initiative reflects the growing importance of sustainability and social responsibility in investment decisions.
The ISSB was established in November 2021 with the objective of creating IFRS Sustainability Disclosure Standards. Its mission is to respond to the demand from various stakeholders, including investors, companies, governments, and regulators, to establish consistent and global disclosure requirements that facilitate a better understanding of how sustainability risks and opportunities affect a company’s performance and prospects.
In June 2023, the ISSB published its initial set of climate and sustainability reporting standards. Subsequently, the board launched a Request for Information (RFI) to gather feedback on its next two-year work plan, which included potential projects related to biodiversity, ecosystems, ecosystem services, human capital, human rights, and a research project on integrating sustainability information into financial reporting.
The letter, which was coordinated by responsible investment NGO ShareAction and signed by 24 asset managers and asset owners from multiple countries, was a response to the ISSB’s RFI. It emphasized the pressing need to prioritize the development of disclosure standards for human capital and human rights. The investors noted that there is currently a high demand for workforce-related data and human rights information, particularly in light of events such as increased employee resignations, layoffs, and the impact of the COVID-19 pandemic on labour markets.
Furthermore, the letter called for the integration of projects related to human capital and human rights within the ISSB’s work plan. It argued that in practice, companies and investors often consider these two topics as interconnected, with human rights due diligence serving as a critical tool for identifying labour-related issues. There are also areas of overlap, such as unionization and diversity and inclusion, where human rights and human capital intersect.
To address these issues comprehensively and meet the growing demand for this type of information, the group of investors urged the ISSB to undertake a joint research project that would provide clarity on how to consider and disclose human capital and human rights information as an integrated whole. This approach aims to enhance transparency and promote responsible business practices in relation to these critical aspects of sustainability reporting.
“It is imperative the ISSB prioritises human capital and human rights in its upcoming work plan. The financial materiality of human capital and human rights-related topics – and the critical role of human rights due diligence in identifying business risks – has never been clearer,” – the letter stated.
