Responsible Investment

Labour

Published metrics fall short of what we need to understand the quality of labour management.
April 2018

Risk Disclaimer

Past performance should not be seen as an indication of future performance. Stock market and currency movements mean the value of, and income from, investments in the strategy are not guaranteed. They can go down as well as up and you may not get back the amount you invest.

 

Views and opinions have been arrived at by BMO Global Asset Management and should not be considered to be a recommendation or solicitation to buy or sell any companies that may be mentioned.

 

The information, opinions, estimates or forecasts contained in this document were obtained from sources reasonably believed to be reliable and are subject to change at any time.

 

400,000 jobs created by companies in the BMO Responsible Global Equity strategy in 2017.

The way a company treats its workers and suppliers is critical in understanding impact – but published metrics fall short of what we need to understand the quality of labour management.

 

Collectively, the companies in our strategy employ over 3.5 million people, and influence the livelihoods of millions more through supply chains. In 2017, almost 400,000 jobs were created by companies in our strategy. Whilst this is encouraging, what we really want to understand is the quality of the jobs created.

 

The way in which companies manage labour issues is fundamental to understanding impact, particularly in relation to SDG8 – Decent Work and Economic Growth. We see it as essential to try to assess this type of impact, particularly in a world where inequality is prevalent. We are particularly conscious of the shift in labour markets being caused by the trend towards automation. Whilst there may be benefits in the reduced need for high-risk manual labour, the displacement of workers could lead to even deeper inequality, exacerbating social tensions and undermining efforts to end poverty. There are good ways and bad ways to automate – and measures such as retraining programmes can go a long way to addressing negative societal impact.

 

We expect all of our companies to respect fundamental principles and rights at work, as laid out by the International Labour Organization (such as freedom of association, and the prohibition of forced labour, child labour and discrimination), in both their direct operations and supply chains. Any significant breaches in standards are identified through our screening processes.

 

In attempting to assess companies’ labour performance, commonly-reported metrics such as employee turnover, board gender equality and lost-time injury rates give only a partial and fragmented view. Many companies of course go well beyond this, but reporting is not standardised or comparable. To help address this, we have supported the Workforce Disclosure Initiative, which aims to improve standards of reporting.

 

Investor engagement has proven a powerful tool for encouraging improvements in companies’ labour standards. In 2018, we will focus particularly on how companies are tackling modern slavery and human trafficking – which, according to the United Nations, is currently the second largest criminal industry in the world.

 

 

Risk Disclaimer

Past performance should not be seen as an indication of future performance. Stock market and currency movements mean the value of, and income from, investments in the strategy are not guaranteed. They can go down as well as up and you may not get back the amount you invest.

 

Views and opinions have been arrived at by BMO Global Asset Management and should not be considered to be a recommendation or solicitation to buy or sell any companies that may be mentioned.

 

The information, opinions, estimates or forecasts contained in this document were obtained from sources reasonably believed to be reliable and are subject to change at any time.

 

“The undoubted prevalence of modern slavery should make engaging with companies on its elimination a top priority.”

 

Rosey Hurst, Responsible Investment Advisory Council

Engagement focus: Modern Slavery Statements

 

The need to end the exploitation of vulnerable workers took a major step forward with the introduction of the 2015 UK Modern Slavery Act. Whilst the scope is limited to companies with UK operations, 50% of the companies in our strategy have now published Modern Slavery Statements in response.

 

Rather than reporting simple metrics, these statements set out – using a common format – how companies identify, manage and report on risks related to forced labour, child labour and human trafficking in their own operations and in the supply chain – the subject of Target 8.7 of the SDGs.

 

Our conversations with NGOs (non-governmental organisations) and companies have shown us that having to produce these statements has helped to raise the profile of this issue within companies, as well as allowing investors to better understand how risks are being managed.

 

In 2018, we will engage with companies in the strategy to encourage best practice in the publication of these statements, with a focus on companies in higherrisk sectors including food, textiles, retail, and construction.