Investors, are you prioritising human rights due diligence?

Investors are not meeting human rights due diligence requirements, data shows. According to a 2024 World Benchmarking Alliance report, about 87% of the financial sector has shown zero evidence of human rights due diligence implementation.  

This gap needs closing to ensure human rights are being protected and environmental impacts are being reduced in global supply chains. 

Investors and financial institutions are under increasing expectations to be more hands-on with investee companies and influence supply chain environmental, social, and governance (ESG) due diligence practices.  

The United Nations Human Rights Council recently called for more engagement from investors, saying, “most financial actors fail to connect human rights standards and processes with environmental, social and governance - or ESG - criteria and investment practices,” attributing this to a “prevailing lack of understanding in that sector.”  The UN said investors “must place risks for people and the planet at the center of their decision-making,” through implementing human rights into their policies and focusing on human rights due diligence and risk remediation.  

We support financial institutions with implementing human rights due diligence. Reach out to one of our experts to find out more. 

Due diligence regulations call for increased investor engagement 

Recent laws also require this connection between investment and ESG strategies, as regulations like the European Union’s Corporate Sustainability Due Diligence Directive (CSDDD) call for financial institutions to carry out due diligence on their own operations and those of their subsidiaries. The EU’s Corporate Sustainability Reporting Directive (CSRD) also outlines requirements for investors, obliging them to disclose information about their due diligence process, including the identification of material impacts, sustainability risks and opportunities. 

New due diligence regulations requiring investor engagement 

• Sustainable Finance Disclosure Regulation (SFDR) 
• Corporate Sustainability Reporting Disclosure (CSRD) 
• Corporate Sustainability Due Diligence Directive (CSDDD) 
• Alternative Investment Fund Managers Directive (AIFMD) 

To reduce the rising business risks that ESG issues in companies’ supply chains pose, investors need to apply more sophisticated due diligence approaches, including going upstream and on site. The financial performance of an investor’s portfolio is inextricably linked to the management practices of the companies within it, and ESG practices are no exception. 

Find out more about global supply chain regulations from our interactive legislation map.

Spearheading investor action toward human rights due diligence 

Best practice for investors looking to incorporate effective human rights and ESG practices into their investment strategies, which are also outlined in regulatory requirements, can include the following high-level steps: 

Implementing due diligence policies 

• Adopt a policy in line with international standards 

Embedding due diligence processes 

• Identify actual and potential adverse impacts from investee companies 

• Prevent and mitigate actual and potential negative outcomes identified 

• Track ongoing risk management 

• Communicate to clients, beneficiaries, stakeholders and other external parties about due diligence outcomes and actions taken 

Providing remedy access 

• Enable or provide access to risk remediation 

• Invest in capacity building and human rights education and training 

Focusing on human rights and due diligence is integral to risk management and mitigation, as well as long-term value creation. In the era of Assurance 4.0, a new era of risk defined by further due diligence and supply chain risk management, investors can increase market value by increasing business sustainability and ESG resilience.

Curious to learn more about data and analytics that support supply chain due diligence? Get a free demo of our EiQ platform, which helps businesses adhere to due diligence regulations, increase supplier visibility, and to maintain supply chain integrity. 

Engaging the entire value chain to implement human rights due diligence

Supplier engagement is critical in improving your supply chain's ESG risk exposure and implementing due diligence strategies. Aligning suppliers with expectations, targets, and regulatory compliance will enhance your end-to-end operations and support in protecting your business integrity. 

Our digital learning service empowers suppliers to implement business best practice and offers training courses in local languages on various supply chain ESG topics. Businesses around the world are using EiQ Learn to understand supply chain risks, align with regulatory requirements, and support supplier compliance and remediation. 

Our ‘Introduction to Human Rights Due Diligence’ interactive eLearning course helps businesses understand the expectations placed on them to manage human rights in their operations. After completing this 15-minute course, suppliers will be better placed to identify and remediate human rights violations throughout the supply chain. 

Access a free eLearning course by clicking here and entering the branch code ‘insights’. 

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