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2019 was the year #HumanRights due diligence came of age

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“The market economy and human rights are the shared values of the European Union” said Timo Harakka, Finland’s Minister of Employment, at the Finnish EU Presidency’s Conference on 2nd December 2019.

Yet Business as usual has led us to the impasse we are now in: where climate change and chauvinist nationalisms, helped by collapse of public trust in global markets, are not just ‘unsustainable’ but present an existential threat to our planet and our most dearly-held values. The urgent challenge now is the reform of Europe’s market economy to deliver human rights at home and throughout our global supply chains, and in the face of one of the greatest threats to human rights – rapid climate breakdown 

 -   writes Phil Bloomer, Executive Director, Business & Human Rights Centre, and Dr Bärbel Kofler, German Federal Government Commissioner for Human Rights Policy and Humanitarian Assistance

As ever, there are no ‘silver bullets’ to make these existential problems vanish. But governments, enlightened business and investors, as well as civil society are seeking acupuncture points that, together, can send irrefutable market signals that end corporate abuse and drive a fast and fair transition to zero carbon economies. Just last week, Sir Christopher Hohn, the head of hedge fund, TCI, stated he would punish the executives of companies, by voting against them, unless they disclose their carbon emissions, and have science-based carbon-reduction targets challenging others, such as the world’s largest asset manager, BlackRock, to follow suit.

From transparency to due diligence

Over the last five years, genuine efforts have been made to use mandatory transparency and disclosure as the ‘nudge’ that shifts business behaviour. The jury on this approach is now in: it is a necessary but insufficient condition for urgent systemic reform of market behaviour.  Analysis of the EU’s Non-Financial Reporting Directive shows that 50% of companies provide clear information on concrete issues, targets and principal risks for environmental matters and only 40% for social and anti-corruption matters. Similarly, out of 10,400 company statements filed under the UK Modern Slavery Act, only 23% have reached the minimum reporting requirements after four years of the act’s adoption.

Evidence shows that current transparency and voluntary regimes are not yielding strong human rights due diligence by companies. The Corporate Human Rights Benchmark has, for three years, measured the policy, practice and performance of the largest 100 to 200 companies in the highest-risk sectors: apparel, agriculture, extractives, and (since 2019) ICT manufacture. The November 2019 Benchmark’s average score was 17%, with fully half of all the companies scoring zero on every indicator of human rights due diligence. The application of the CHRB’s world-leading methodology to three EU member states has provided very similar results. For instance, 90% (18/20) of the largest German companies assessed failed to fully disclose how they manage their human rights risks sufficiently (due diligence).

This glacial progress by companies is perhaps why Professor Ruggie, the author of the UN Guiding Principles on Business and Human Rights, is still calling on governments to implement a ‘Smart Mix’ of measures emphasising the need to rebalance voluntary action by companies with mandatory measures and laws. At the Finnish EU Presidency’s recent conference on business and human rights he called on these to be clear in their scope and liability, adding currently ‘there is no consequence from non-compliance’. Similarly, German Minister of Labour, Hubert Heil, said “if people are put at risk through exploitation of their life and limb, and others profit from it economically, we can do something about it with clear liability rules” (own translation).  Mandatory human rights due diligence laws without liability provisions risk yielding similarly weak results as transparency legislation. Tiina Astola, Director-General, Justice and Consumers (DG JUST), European Commission reinforces this: “Front-runner companies recognise the benefits of such rules which provide a level playing field, legal certainty and facilitate leverage with third parties by setting non-negotiable standards”.

European leadership in 2020

European governments, civil society, with enlightened companies, and investors are beginning to drive decisive action. The big prize in 2020, for those seeking markets that deliver shared prosperity and security, will be mandatory human rights and environmental due diligence laws, at the national and European levels.

Support has ballooned in 2019. Thirty-two European businesses with an annual turnover of more than €1 billion have public statements or endorsements  in support. In Germany alone, 42 companies have recently called for mandatory human rights and environmental due diligence legislation. Over 100 investors have called for mandatory due diligence, such as the 23 global institutional investors, managing assets over €361bn, that support Swiss legislation on this issue. And over 100 civil society organizations and trade unions have called for mandatory human rights and environmental due diligence legislation at an EU level.

These voices support vital legislative initiatives in the governments and parliaments of Germany, Netherlands, Finland, Switzerland, and Norway, which follow the French lead with their Loi de Vigilance.

Of course, bold government action to ensure markets work for shared prosperity has always been opposed by vested interests that benefit directly from pollution and the toleration of abuse. Now is no exception. A number of business associations – European and international – are issuing warnings of the costs of action. Fortunately, it now seems that the majority recognise the far greater risks of inaction on climate and human rights. Amfori, with 2,300 members worldwide, has stated “the EU is best placed to work towards adopting an EU-wide human right due diligence framework which would create a robust, coherent and predictable system for businesses operating in the EU. Conducting human rights due diligence should therefore become the licence to operate in the EU market.” Equally, two major Swiss associations, the Groupement des Entreprises Multinationales (GEM), representing 90 multinational companies, and the Swiss Trading & Shipping Association (STSA), representing 170 commodity trading companies and related services, support mandatory human rights due diligence in Switzerland.

But why is Europe’s leadership so vital? The EU often acts as the global trend-setter on regulation of companies, even in sectors where it does not dominate, like ICT. When the EU sets minimum legal standards, global business increasingly adopts them internationally.

For the sake of the planet, and human prosperity, Europe’s leadership in the next year on human rights and environmental due diligence legislation has never been more needed. The diverse movement of governments, parliamentarians, responsible companies and investors, and civil society will press ahead rapidly with this vital initiative in 2020. Smart and effective due diligence legislation will be a major step forward in the reform of markets to regain public trust, and secure shared prosperity and a living planet.

Catalan

Catalan MEPs lose immunity after secret European Parliament vote

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Clara Ponsati, Carles Puigdemont and Toni Comin are wanted by Spain for their part in the 2017 Catalan independence referendum

The European Parliament has voted to remove the parliamentary immunity of three Catalan MEPs wanted by Spain over the 2017 independence push. Former Catalan president Carles Puigdemont and his ex-ministers Clara Ponsati and Toni Comin are exiled in Brussels, and Madrid could now reactivate European arrest warrants which have so far been refused by Belgium, writes Greg Russell @National_Greg.

In a secret ballot held last night but only revealed this morning, more than 400 MEPs voted to lift their immunity, almost 250 against and more than 40 MEPs abstained.

Puigdemont is expected to raise the issue at the European Court of Justice (ECJ) after a report from the parliament’s Legal Affairs Committee recommending the removal of their immunity was leaked to the media.

This is the third time the Spanish Supreme Court has tried have them extradited, after previous attempts failed in Scotland, Belgium and Germany.

Losing their immunity will not affect their status as MEPs, which they will retain until they are barred from office by a conviction.

Aamer Anwar, lawyer for Ms Ponsati, tweeted: “Shameful vote by @Europarl_EN giving into Spain to lift immunity of MEPs @ClaraPonsati @toni_comin @KRLS Who face extradition & political persecution for exercising the democratic will of the Catalan people-The legal battle goes on”

The Spanish government immediately welcomed the decision by the European Union’s legislature as a victory for the rule of law and against those who sought to break the north-eastern region away from the rest of Spain.

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Business

Has the shine worn off activist investment?

Graham Paul

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A few recent cases suggest that the tide may finally be turning on activist investment, which until recently seemed as if it was becoming an entrenched part of the business world. Although the value of activist investor-held assets may have been climbing in recent years (in the UK, this figure grew 43% between 2017 and 2019 to reach $5.8 billion), the number of campaigns fell by 30% in the year leading up to September 2020. Of course, that drop-off can partly be explained by the fallout from the ongoing coronavirus pandemic, but the fact that more and more plays appear to be falling on deaf ears could signal a bleaker long-term outlook for activist agitators going forwards.

The latest case in point comes from England, where wealth management fund St James’s Place (SJP) were the subject of an attempted activist intervention on the part of PrimeStone Capital last month. After purchasing a 1.2% stake in the company, the fund sent an open letter to the SJP board of directors challenging their recent track record and calling for targeted improvements. However, the lack of incision or originality in the PrimeStone manifesto meant that it was brushed off with relative ease by SJP, with little impact being felt on its share price. The underwhelming nature and outcome of the campaign is indicative of a growing trend in recent years – and one that could be set to become more pronounced in a post-Covid-19 society.

PrimeStone unable to inspire

The PrimeStone play took the traditional form favoured by activist investors; after acquiring a minority stake in SJP, the fund tried to flex its muscles by highlighting the perceived shortcomings of the current board in an 11-page missive. Among other issues, the letter identified the company’s bloated corporate structure (over 120 head of department on the payroll), flagging Asian interests and tumbling share price (stocks have fallen 7% since 2016). They also identified a “high-cost culture” in SJP’s backroom and made unfavorable comparisons with other prosperous platform businesses like AJ Bell and Integrafin.

While some of the criticisms had elements of validity, none of them were especially novel—and they didn’t paint a complete picture. In fact, several third parties have come to the defence of SJP’s board, pointing out that equating the company’s downturn with the rise of interests such as AJ Bell is unfair and overly simplistic, and that when set against more reasonable touchstones such as Brewin Dolphin or Rathbones, SJP holds its own remarkably well.

PrimeStone’s admonishments over SJP’s high spending may hold some water, but they fail to recognize that much of that outlay was unavoidable, since the firm was forced to comply with regulatory changes and succumb to revenue headwinds beyond its control. Its impressive performance against its competitors confirms that the company has been dealing with sector-wide issues exacerbated by the pandemic, something which PrimeStone singularly failed to fully acknowledge or address.

Momentous vote imminent for URW

It’s a similar story across the Channel, where French billionaire Xavier Niel & businessman Léon Bressler have collected a 5% stake in international shopping mall operator Unibail-Rodamco-Westfield (URW) and are adopting Anglo-Saxon activist investor tactics to try and secure URW board seats for themselves and push URW into a risky strategy to drive up its share price in the short term.

It’s clear that, like most companies in the retail sector, URW needs a fresh strategy to help weather the pandemic-induced recession, particularly given its relatively high level of debt (more than €27 billion). To that end, URW’s board of directors are hopeful of launching project RESET, which targets a capital raise of €3.5 billion in order to maintain the company’s good investment-grade credit rating and ensure continued access to all important credit markets, while gradually deleveraging the shopping mall business.

Niel and Bressler, however, want to forego the €3.5bn capital increase in favour of selling off the firm’s US portfolio—a collection of prestigious shopping centres which have by and large proven resistant to the changing retail environment—to pay down debt. The activist investors’ plan is being opposed by a number of third party advisory firms such as Proxinvest and Glass Lewis, with the latter calling it “an excessively risky gambit”. Given that credit rating agency Moody’s have predicted an 18-month slump in rental income that is likely to hit shopping centres – and have even gone as far as to warn that failure to implement the capital raise underpinning RESET could result in a downgrading of URW’s rating – it seems likely that Niel and Bressler’s ambitions will be rebuffed at the November 10th shareholder meeting, in the same way that PrimeStone’s have been.

Long-term growth over short-term gains

Elsewhere, Twitter CEO Jack Dorsey appears to have also overcome an attempt by high-profile activist investor Elliott Management to oust him from his role. Although a recent committee meeting did cede to some of Elliott’s demands, such as reducing board terms from three years to one, it chose to declare its allegiance to a chief executive who had overseen total shareholder returns of 19% prior to Elliott’s involvement with the social media behemoth earlier this year.

Alongside the atypically uninspiring campaigns conducted elsewhere in the market, and the retrogression of the sector as a whole, could it be that activist investors are losing their clout? For a long time, they have drawn attention to their ventures through flashy antics and bold prognoses, but it seems that companies and shareholders alike are catching on to the fact that behind their bluster, their approaches often contain fatal flaws. Namely, a focus on short-term inflation of the share price to the detriment of long-term stability is being exposed as the irresponsible gamble that it is – and in a shaky post-Covid economy, judicious prudence is likely to be prized above immediate profit with increasing regularity.

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coronavirus

Russia has launched a propaganda campaign to smear the coronavirus vaccine being developed by Oxford University scientists

EU Reporter Correspondent

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The Kremlin is accused of spreading fear about the serum, claiming it will turn people into monkeys. The Russians base the suggestion on the fact the vaccine is using a chimpanzee virus. The Russians have disseminated pictures and memes of Prime Minister Boris Johnson looking like “a yeti”. It’s captioned: “I like my bigfoot vaccine”.

And other shows a “monkey” scientist holding a syringe and working on the treatment.

The monkey is wearing an AstraZeneca lab coat.

The pharmaceutical giant is at the forefront of developing a vaccine.

Last month the London Globe and the EU Reporter carried stories about the Russian campaign.

Both publications have since removed two articles from their online sites.

Publisher Colin Stevens said:

“We were given the story by a freelance journalist in Brussels.

“However, after an investigation by The Times we now know the story has no basis.

“When I heard the stories were false, they were taken down straightaway.

“Sadly, we have been the unwilling victims of a Russian campaign to discredit the excellent work being done by Oxford University scientists.

“Even the very best get caught out now and again. Indeed even the Times was fooled into publishing the fake "Hitler Diaries" some years ago.”

AstraZeneca's chief executive Pascal Soriot condemned attempts to undermine their work.

He said: “Scientists at AstraZeneca and at many other companies and institutions around the world are working tirelessly to develop a vaccine and therapeutic treatments to defeat this virus.

“But it is independent experts and regulatory agencies across the world that ultimately decide if a vaccine is safe and effective before it is approved for use.

“Misinformation is a clear risk to public health.

“This is especially true during the current pandemic which continues to claim tens of thousands of lives, significantly disrupt the way we live and damage the economy.”

Professor Pollard, who is professor of Paediatric Infection and Immunity at the University of Oxford, told BBC Radio Four's Today programme:

“The type vaccine we have is very very similar to a number of other vaccines, including the Russian vaccine, all of which use the common cold virus from humans or from chimpanzees.

“To our bodies, the viruses look the same.

“We don't actually have any chimpanzees involved at all in the process of making the vaccine, because it is all about the virus, rather than animals it might more commonly

Meanwhile, Doctor Hilary Jones told Good Morning Britain the attempts at disinformation were “utterly ridiculous and shameful”.

He added:

“Oxford have a fantastic reputation; they are doing this thoroughly and are looking at thousands of people from all different groups and ages.

“They are doing this safely and effectively and for the Russians to try to besmirch what they are trying to do because parts of the vaccine comes from chimpanzee material is utterly ridiculous and shameful.

“I would put my money on Oxford every time.”

A Russian Embassy spokesman in London said: “The suggestion that the Russian state may conduct any kind of propaganda against the AstraZeneca vaccine is itself an example of disinformation.

“It is obviously aimed at discrediting Russia's efforts in combating the pandemic, including the good co-operation we have established with the UK in this field.”

 

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