Investor Expectations and ESG Integration
Institutional investors managing trillions of dollars in assets have emerged as a powerful force driving corporate human rights performance. Their influence operates through multiple channels: stewardship (shareholder engagement and voting), integration (incorporating human rights factors into investment analysis), exclusion (removing companies with unacceptable human rights practices from portfolios), and litigation (bringing derivative actions against boards that fail to manage human rights risks). Understanding how investors assess, benchmark, and engage on human rights is increasingly essential for corporate sustainability professionals - particularly as mandatory due diligence laws raise the fiduciary stakes of human rights mismanagement.
Corporate Human Rights Benchmark (CHRB)
The Corporate Human Rights Benchmark, developed by the World Benchmarking Alliance (WBA), is the most rigorous and widely cited publicly available assessment of corporate human rights performance. It currently covers approximately 100 companies across five high-risk sectors: food and agricultural products, apparel and footwear, extractives (mining and oil and gas), ICT manufacturing, and automotive manufacturing.
The CHRB methodology assesses companies across five measurement areas, each weighted by its relative importance to the overall score:
- Policy commitments (8%): Public commitments to respect all internationally recognised human rights and the rights of workers, including ILO core conventions, working hours standards, and a commitment to remedy.
- Board-level accountability (8%): Oversight of human rights strategy and policy at board level, including evidence that board members possess relevant human rights knowledge and that business model risks to human rights are reviewed at the highest governance level.
- Embedding respect in culture and management systems (25%): Day-to-day responsibility and resources for human rights, incentives and performance management, training, supply chain mapping and disclosure, and alignment of purchasing decisions with human rights commitments.
- Human rights due diligence (25%): Processes for identifying, assessing, integrating, tracking, and communicating on human rights risks and impacts, aligned with UNGPs Principles 17-21.
- Remedies and grievance mechanisms (34%): Worker and community grievance mechanisms, procedural transparency, and actual provision of remediation for identified harms.
2025 CHRB Headline Findings
The most recent CHRB results (covering 105 companies) found an average score of 53.7/100, with significant variation by sector: extractives scored highest at 64%, food and agriculture at 58%, and automotive manufacturing lowest at 44%. While 80% of companies improved since their last assessment, nearly one in four regressed or stagnated. Critically, only 24% of companies disclosed the names and locations of significant suppliers, despite growing regulatory expectations on supply chain transparency. Only 10% of companies assessed how their business model itself generates human rights risks - the foundational step for effective due diligence under the CSDDD.
KnowTheChain Benchmark
KnowTheChain is a benchmark and engagement platform specifically focused on forced labour risks in global supply chains. It assesses companies in three high-risk sectors: information and communications technology (ICT), food and beverages, and apparel and footwear. Companies are scored on seven themes: commitment and governance, traceability and risk assessment, purchasing practices, recruitment, worker voice, monitoring, and remedy.
KnowTheChain scores tend to be lower than general human rights benchmarks because they focus specifically on the deeper, more operationally demanding aspects of supply chain due diligence. Key findings from recent benchmarks include:
- Most companies score poorly on recruitment - specifically, very few have policies requiring suppliers to prohibit the charging of recruitment fees to migrant workers (a primary driver of debt bondage and forced labour).
- Worker voice mechanisms in supply chains are almost universally weak: companies rarely facilitate the establishment of trade unions among supplier workers or create accessible grievance channels for supply chain workers.
- Purchasing practices that contribute to forced labour - such as last-minute order changes and delayed payment - are rarely addressed in supplier codes of conduct.
WBA and the Social Benchmark
Beyond the CHRB, the World Benchmarking Alliance has developed a broader Social Benchmark assessing the 2,000 most influential companies across all sectors on social topics including decent work, just transition, and community wellbeing. The Social Benchmark applies WBA's "keystone companies" concept - the recognition that certain companies are so central to global supply chains and markets that their practices have a disproportionate influence on outcomes for workers and communities worldwide.
For investors, these benchmarks serve several practical functions:
- Screening: Identifying companies with persistently low scores as engagement targets or, in severe cases, exclusion candidates.
- Engagement targeting: Using specific indicator scores to structure targeted engagement on priority gaps - for example, engaging a company scoring zero on supply chain transparency to establish a supplier disclosure programme.
- Progress tracking: Monitoring improvement (or regression) over successive benchmark cycles as a measure of engagement effectiveness.
- ESG integration: Incorporating CHRB scores as an input into proprietary ESG ratings, particularly for sectors where human rights risks are material to long-term value.
Analogy: Credit Ratings for Human Rights
Credit ratings condense complex financial information into a single comparative score, enabling investors to assess default risk across a large universe of companies without reading every financial statement. The CHRB and similar benchmarks perform an analogous function for human rights risk: they condense complex and hard-to-verify information about company policies, processes, and outcomes into comparable scores, enabling investors to assess human rights performance at portfolio scale. Like credit ratings, benchmark scores are not infallible - they depend on disclosed information and may miss material risks - but they create a common language for investor-company dialogue on human rights expectations.
Investor Engagement Strategies
Institutional investors engage with companies on human rights through several mechanisms, often combining them for greater effect:
- Direct dialogue: Private meetings with company management and board members to raise specific concerns and set expectations for improvement, typically supported by detailed questions drawn from benchmark gaps or incident analysis.
- Collaborative engagement: Investors joining coalitions such as the Investor Alliance for Human Rights or the PRI Investor Working Group on Sustainable Palm Oil to amplify their voice and share research costs. The Investor Alliance on Human Rights represents investors managing over USD 9 trillion in assets.
- Shareholder resolutions: Filing or co-filing binding or advisory shareholder resolutions requiring companies to publish human rights policies, conduct supply chain assessments, or report on specific risk categories. These are most effective when supported by significant shareholder coalitions.
- Voting on director elections: Voting against the re-election of board members or audit committee chairs at companies that have persistently failed to address material human rights risks, signalling accountability at the highest governance level.
Fiduciary Duty and Human Rights
A persistent argument in some investment circles is that considering human rights factors in investment decisions is inconsistent with fiduciary duty - the legal obligation to act in the best financial interests of beneficiaries. This argument is increasingly difficult to sustain. Major legal reviews in the UK, the US, and internationally have confirmed that long-term, systemic risks to portfolio value - including human rights risks that materialise as regulatory penalties, litigation costs, reputational damage, and supply chain disruptions - are legitimately within the scope of fiduciary analysis.
The UNPRI's "Why and How Investors Should Act on Human Rights" guidance (2020) argued that institutional investors have three categories of fiduciary obligation in the human rights space: conducting human rights due diligence across their investment activities, using ownership rights to improve human rights performance of investee companies, and engaging with policymakers to support the development of the enabling regulatory environment for responsible business. The CSDDD and equivalent laws are partly a product of exactly this type of policy engagement by investor coalitions.
Example: Investor Coalition Engagement on Migrant Worker Fees
In 2020, a coalition of 35 investors representing USD 5.3 trillion in assets under management, coordinated by the Investor Alliance for Human Rights, wrote to 45 global companies in the technology, apparel, and food sectors requesting information on their policies to prohibit recruitment fee charging to migrant workers. The engagement identified that fewer than half the companies had explicit no-fee policies and that fewer still verified compliance in their supply chains. Follow-up engagement over two years contributed to a measurable increase in the proportion of companies adopting and publicly committing to implement the Employer Pays Principle across their supply chains.
Key Takeaways
- 1The Corporate Human Rights Benchmark (CHRB), produced by the World Benchmarking Alliance, covers 105 companies across five high-risk sectors with an average score of 53.7/100, weighted heavily on remedies (34%) and due diligence and management systems (25% each)
- 2KnowTheChain focuses specifically on forced labour risks in ICT, food, and apparel supply chains, finding persistent weakness in recruitment policies, worker voice mechanisms, and purchasing practice alignment
- 3Investors use benchmarks for screening, targeted engagement, progress tracking, and ESG integration, with coalitions like the Investor Alliance for Human Rights coordinating engagement across trillions in assets under management
- 4Investor engagement mechanisms include direct dialogue, collaborative platforms, shareholder resolutions, and director election voting, with the most effective approaches combining multiple mechanisms over sustained multi-year engagement cycles
- 5Fiduciary duty does not prohibit human rights integration in investment decisions - major legal reviews confirm that long-term, systemic human rights risks are legitimately within the scope of fiduciary analysis, and that institutional investors have positive obligations to use ownership rights to improve human rights performance