Chapter 4 Flashcards
(55 cards)
1
Q
How do investors often expect companies to manage social issues?
A
- By using a best-in-class approach, whereby a company is better than its peers on a number of material issues relevant to its sector (e.g., occupational health and safety or managing its impact on local communities).
2
Q
What are some social megatrends?
A
- Globalization
- Automation and artificial intelligence (AI)
- Inequality and wealth creation
- Digital disruption, social media, and access to electronic devices
- Changes to work, leisure time, and education
- Changes to individual rights and responsibilities and family structures
- Changing demographics, including health and longevity
- Urbanization
- Religion
3
Q
What environmental megatrends have a significant social impact?
A
- Climate change and transition risk
- Water scarcity
- Mass migration
4
Q
What is globalisation?
A
- the integration of local and national economies into a global (and less regulated) market economy.
- The growth in global interactions has increased international trade and the exchange of ideas and culture.
5
Q
What is globalisation caused by?
A
- a rapid increase in cross-border movement of goods, services, technology, people, and capital.
- good: it is stated to have led to increased efficiency in the markets, resulting in wider availability of products at lower costs.
- BAD: it is claimed to be detrimental to social well-being due to social structural inequality.
6
Q
What are two implications of globalisation?
A
- Offshoring
- Dependency
7
Q
What is dependency?
A
- As US-based and Asian companies dominate the industry for mobile telephones, computers, and other IT products, European countries are more dependent on these suppliers.
8
Q
What sectors is Al expected to have a significant effect on?
A
- Health care
- Automotive
- Financial services and auditing
- Security
- Creative.
9
Q
Give an example of the implication of automation on investors
A
- Transport industry on brink
- Expected less jobs for drivers
- Beneficial for self-driving car companies
- Not beneficial for traditional heavy goods vehicles
- Major job losses expected
10
Q
What did the OECD find about top 10% vs poorest 10%
A
- Average income of richest 10%, 9 times that of the poorest 10% across the OECD
- Up from 7 times from 1990
Economic or income inequality
11
Q
What are examples of digital disruption?
A
- Disruption companies (Amazon, uber, airbnb)
- Big data
- Mobile phones
12
Q
What is a related consequence of digital technologies?
A
- the huge amount of data that can be collected, stored, and processed (big data)
- the ownership or use of the data (including data privacy, monetization of data, etc.).
13
Q
What are some opportunities of big data?
A
- More personalised services
- Products
- Health treatments
14
Q
What are some controversies of big data?
A
- some data are being used and sold in more extreme or socially unacceptable ways
- Examples include social media platforms-such as Facebook, Linkedin, and X-selling data for political or marketing campaigns
- (e.g., the cases of Cambridge Analytica allegedly using Facebook data to try to manipulate elections and Meta agreeing to pay fines to regulators and settle class action lawsuits relating to its data privacy and practices).
- Debate about growing need for regulation which can affect profitability of companies
15
Q
What is the Better Life Index?
A
- OECD
- Rates a wide range of developed and emerging economies in a number of areas, including life satisfaction
16
Q
What have developed countries seen happen to average hours worked?
A
- Decrease significantly
- UK seen average annual hours decrease from 1775hours in 1970 to 1532 in 2022
- Partially due to automation and part-time employment
17
Q
Describe what has happened to education levels
A
- Increased
- % employees with higher education degree has grown
- Some sectors suffer from lack of qualified employees and there is war on talent’
18
Q
what should investors consider when assessing companies that rely heavily on employees
A
- Companies human capital management strategies
- DEl strategies
- How companies are coping with structural changes in labour market
19
Q
What is advantage of diversifying workforce?
A
- Leads to better financial results
- Some best-in-class funds and impact investors take diversity (gender and other types of diversity) into account in their risk analysis and stock selection.
20
Q
Describe what has changed to life expectancy?
A
- Life expectancy increasing
- New born baby born 2021 expect to live 25 years longer than if born 1950
- 68.4 for men, 73.9 for women
- Better in developed countries
- Leads to aging population
21
Q
Descirbe aging population
A
- Around 10% global population above 65 in 2021 up from 5% in 1950
2. Projected to grow to 17% by 2050
22
Q
Which countires are expected to have the highest % of their population above 65 by 2050?
A
- China
- South Korea
- Japan
- Italy
- Spain
23
Q
What are the effects on society of aging population?
A
- The ratio between the active and the inactive part of the workforce drops, impacting national tax revenues and challenging pension systems, including an impact on retirement accounts that need to last longer.
- Older people have higher accumulated savings per person than younger people but spend less on consumer goods, which is a business risk for some industries,
- In some categories, such as health care, expenditure rises sharply as populations age.
24
Q
Describe investor initiatives to ensure equitable circulation of COVID-19 vaccines
A
- The pharma group Moderna faced a shareholder proposal demanding to share its COVID-19 vaccine technology to poorer countries and requesting an explanation regarding the high prices given the amount of government
2. A group of 65 institutional investors demanded that the global availability of vaccines be linked to the remuneration policy of managers and directors
25
What is urbanisation?
1. Population shfiting from rural to urban areas
2. 1950, 30% of world lived in urban environment, expected to increase to 68% by 2050
26
Why is it not a simple solution of building new wastewater treatment plants and reducing groundwater over-drafting for water scarcity?
1. Wastewater treatment is highly capital intensive, so there is restricted access to this technology in some regions.
2. The rapid increase in the population of many countries makes this a race that is difficult to win.
3. There are enormous costs and skillsets involved in maintaining wastewater treatment plants, even if they are successfully developed.
27
How can climate change lead to mass migration?
1. The scarcity of fresh water and desertification due to climate change in several emerging countries is believed to be one of the reasons for mass migration streams from developing countries to developed countries where these issues are less present.
2. Climate change might result in an increase of “environmental migrants,” with the most common projection being that the world will have 150 million to 200 million such migrants by 2050.
28
Where should investors start when implementing social factors in their investment decision?
1. A good starting point is to determine which social factors are most controversial or financially material in each industry.
2. As a next step, investors can assess how exposed certain companies are to these sector-specific social factors and if and how the company manages these risks. This might depend on their business models or on the nature and geographical location of their business operations.
3. Finally, where relevant, investors should assess critical social factors in the supply chain.
29
What framework gives guidance on the financially material topics within industries?
1. The Sustainability Accounting Standards Board (SASB)
30
What are social factors that impact internal stakeholders?
1. Human capital development
2. Working conditions, health and safety
3. Human rights
4. Employment standards and labor rights
31
What social factors impact external stakeholders?
1. Stakeholder opposition and controversial sourcing
2. Product liability and consumer protection
3. Social opportunities
4. Animal welfare and antimicrobial resistance
32
What does ensuring human capital development do for the workforce?
1. Ensures it is well equipped for performing its tasks and responsibilities
2. Operates under the latest standards and regulations
3. Remains motivated
33
What is focus of health and safety and occupational health?
1. H&S: general focus on protecting the workforce from accidents and fatalities
2. Occupational health: limiting workforce exposures to minimise the risk of occupational diseases or injury
34
Describe what happened in the Rana Plaza disaster:
1. Structural failure resulted in collapse of 8-story commercial building in Dhaka
2. Death toll of 1,134 people, 2500 injured
3. Buildings owners ignored warnings to avoid using the building after cracks appeared the day before
4. Garment workers ordered to return to work
5. Managers decision led to high death toll - made decision due to pressure to complete orders on time
35
What resulted from Rana Plaza disaster
1. Drew attention to human rights abuses in garment sector and failure of Bangladesh gov and corps to create workplaces that respect and protect the lives of workers and mitigate risk
2. 175 brands signed the Bangladesh accord pledging to commit to higher fire and health and safety standards
3. Led by the Interfaith Center on Corporate Responsibility, the Bangladesh Investor Initiative, comprising 250 institutional investors and representing over USD4.5 trillion in assets under management, was formed in May 2013 to urge a strong corporate response to Rana Plaza, including participation in the Accord
36
how has health and safety evolved?
1. broader concept of working conditions that promotes employee well-being for instance, through ergonomic workplaces and flexible working hours.
2. Mental health (such as burnout risks in the finance industry) and other employee benefits to promote their well-being outside of the workplace (including medical checks, gym membership sponsorship, and training programs on nutrition-related risks).
3. “financial wellness,”- Assistance with personal financial issues like personal budgeting and retirement planning/saving leads to less distracted and less stressed workers.
37
What is the days of receivables?
1. It's the average number of days it takes for customers to pay their invoices.
2. Not affected by health and safety directly
38
What is the most important foundation for international human rights?
1. Universal Declaration of Human Rights
2. Proclaimed by the United Nations General Assembly in 1948 through General Assembly Resolution 217A and is a common standard of achievement for all peoples and all nations
39
Which two guidelines with respect to human rights have a direct effect on companies and investors?
1. The United Nations Guiding Principles on Business and Human Rights (UNGPs)
2. The OECD Guidelines for Multinational Enterprises (MNEs)
40
What are the UNGPs?
1. Set of guidelines implementing the United Nations’ “Protect, Respect and Remedy” framework for the responsibilities of transnational corporations and other business enterprises with regard to human rights
2. these guiding principles provided the first global standard for preventing and addressing the risk of adverse impacts on human rights linked to business activity.
3. continue to provide the internationally accepted framework for enhancing standards and practice regarding business and human rights.
41
What are the three pillars of the UNGPs that outline how states and businesses should implement the framework?
1. The state duty to protect human rights
2. The corporate responsibility to respect human rights
3. Access to remedy for victims of business-related abuses
42
What are the OECD guidelines for multinational enterprises?
1. set of government-backed recommendations on responsible business conduct.
2. The governments adhering to the guidelines aim to encourage and maximize the positive impact MNEs can make to sustainable development and enduring social progress.
3. They provide voluntary principles and standards for responsible business conduct in different areas
43
What are examples of areas that the OECD cover?
1. employment and industrial relations,
2. human rights,
3. environment,
4. information disclosure,
5. combating bribery,
6. consumer interests,
7. science and technology,
8. competition, and
9. taxation.
44
What is the responsible business conduct for institutional investors?
1. Helps investors implement the due diligence recommendations of the OECD guidelines for MNEs to prevent or address adverse impacts related to human/labor rights, environment, corruption
45
What is the corporate Human Rights Benchmark?
1. collaboration led by investors and civil society organizations dedicated to creating the first open and public benchmark of corporate human rights performance
2. The CHRB provides a comparative snapshot year-on-year of the largest companies on the planet
3. looking at the policies, processes, and practices they have in place to systematize their human rights approach and how they respond to serious allegations.
4. Initially, only companies from three industries—agricultural products, apparel, and extractives—were chosen on the basis of their size and revenues.
5. The measurement themes and indicators within the CHRB provide a rigorous proxy measure of corporate human rights performance, which can be used by analysts and investors.
6. The themes consist of multiple questions that are listed in the report
46
What do the questions in the CHRB address?
1. governance and policy commitments,
2. embedding respect and human rights due diligence,
3. remedies and grievance mechanisms,
4. performance regarding company human rights practices,
5. performance in responding to serious allegations, and
6. transparency.
47
What is Human Rights 100+?
1. Principles for Responsible Investment (PRI) collaborative initiative for investors to address human rights and social issues through their stewardship activities
2. Encompass a broad range of social issues, allowing investors to prioritize the most severe human rights risks and outcomes within their stewardship activities.
3. It includes investor collaborative engagement with companies, along with potential further escalation where needed, and also supports investor engagement with policymakers and other stakeholders to make progress on the overall goal.
48
Where are the most important labour rights summarised?
1. International Labour Organization’s (ILO’s) international labor standards.
2. They are aimed at promoting opportunities for women and men to obtain decent and productive work with freedom, equity, security, and dignity.
49
What are the 8 fundamental conventions of the ILO?
1. Freedom of Association and Protection of the Right to Organise
2. Right to Organise and Collective Bargaining
3. Forced Labour
4. Abolition of Forced Labour
5. Minimum Age
6. Worst Forms of Child Labour
7. Equal Remuneration
8. Discrimination (Employment and Occupation)
50
What is Freedom of Association and Employee Relations?
1. In order to ensure that the rights of the employees are well served, employees should have the freedom to form or join an association or a trade union that advocates for the interests of the employees.
2. In some countries or industries this right is limited
3. . For example, several companies within the retail industry are renowned for their anti-union stance.
4. Walmart has been targeted by several international institutional investors to adopt a more pro-union stance.
5. When freedom of association is established, often other labor rights violations—such as forced labor, child labor, and discrimination—are better safeguarded.
51
What is modern slavery?
1. refers to situations of exploitation that a person cannot refuse or leave because of threats, violence, coercion, deception, and/or abuse of power.
2. This is considered to be an umbrella term encompassing such practices as forced labor, debt bondage, forced marriage, and human trafficking
52
How many people are thought to be in forced labour?
1. 25 million
53
What is the Platform Living Wage Financials?
1. established at the end of 2018
2. It is a coalition of (mainly Dutch) financial institutions that encourage and monitor investee companies to address the non-payment of a living wage in their global supply chains.
3. This investor coalition uses its influence and leverage to engage with its investee companies.
54
How does the PLWF engage with investee companies?
1. measure their performance on living wage,
2. discuss the assessment results, and
3. support innovative pilots.
they make sustainable investment decisions based on (the lack of) progress subject to individual choices and policy preferences of each member of the platform.
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