Putting the "S" in ESG

Measuring Human Rights Performance for Investors

NYU Stern Centre for Business and Human Rights, 2017: Click here to read this paper.

Investors increasingly recognise that the lack of reliable, accessible information about the human rights track records of individual companies hinders their ability to manage medium- to long-term risks and advance social objectives in an investment context. While much of this report focuses on the shortcomings of current efforts, it recognises the significant conceptual and operational hurdles and costs that make the assessment of human rights performance such a daunting task.

This paper is based on analysis of 12 existing frameworks for assessing “S” – the social component of “environmental, social, and governance” (ESG) investing approaches. The efforts of those behind these frameworks have been a pioneering first step in pushing investors to develop metrics and tools that help improve the human rights performance of companies.

Four Fundamental gaps:

  1. Social measurement evaluates what is most convenient, not what is most meaningful.

  2. Current approaches to disclosure are not likely to yield the information needed to identify social leaders.

  3. The lack of consistent standards underpinning social measurement increases costs and creates confusing “noisiness” across the ESG industry.

  4. Existing measurement does not equip investors to respond to rising demand for socially responsible investing strategies and products.

Four principles for improved measurement of social performance:

  1. Measure companies’ real-world effects, not just their efforts.

  2. Diversify the data – go beyond company disclosure.

  3. Establish and rely upon clear standards for evaluating “S”.

  4. Target investors as the primary audience.


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