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Conduct? 1. A comprehensive international instrument on responsible - - PowerPoint PPT Presentation
Conduct? 1. A comprehensive international instrument on responsible - - PowerPoint PPT Presentation
How does OECD lead on Responsible Business Conduct? 1. A comprehensive international instrument on responsible business conduct endorsed by governments the OECD Guidelines for Multinational Enterprises 2. National Contact Points: The only
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A comprehensive set of government- backed recommendations on responsible business conduct.
- Disclosure
- Human Rights
- Employment & Industrial Relations
- Environment
- Combating bribery, bribe solicitation and
extortion
- Consumer interests
- Science & Technology
- Competition
- Taxation
.
The OECD Guidelines for Multinational Enterprises set expectations for RBC
48 Adherents
representing
62% of FDI Global Inflows
82% of FDI Global Outflows
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‘Golden Triangle’ for Responsible
Business Conduct
UN Guiding Principles for Business & Human Rights ILO Tripartite Declaration on MNE’s
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A Global Grievance Mechanism for Corporate Responsibility
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What makes OECD sector projects unique?
Demand driven Backed by 48 governments Developed through a multi-stakeholder process representing industry leaders and other stakeholders Whole of value-chain approach
Extractive sector Mineral supply chains Agricultural supply chains Garment supply chains Financial sector
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- Key recommendations of the Guidelines and
implications for institutional investors
- Due diligence for Institutional Investors
– Good practice – Key considerations – Due diligence practices by asset class and investment strategy
- Annexes:
– Terminology – Common Investment Value Chains – Asset Classes and Investment Strategies
RBC for Institutional Investors: Summary
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OECD Guidelines for Multinational Enterprises – Due Diligence
“Enterprises should:
- Carry out risk-based due diligence , (…), to identify, prevent and mitigate
actual and potential adverse impacts (…), and account for how these impacts are addressed.
- Avoid causing or contributing to adverse impacts on matters covered
by the Guidelines, through their own activities, and address such impacts when they occur.
- Seek to prevent or mitigate an adverse impact where they have not
contributed to that impact, when the impact is nevertheless directly linked to their operations, products or services by a business relationship.”
Risk-based due diligence is main tool to identify, prevent or mitigate risk
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Components of Due Diligence for RBC
I: Embedding RBC In Policies & Management Systems II: Due Diligence: Identify and Assess II: Due Diligence: Prevent and Mitigate II: Due Diligence: Account - Tracking II: Due Diligence: Account - Communicating III: Providing for or cooperating in REMEDIATION
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Direct linkage: “the existence of RBC risks (potential impacts) or actual RBC impacts in an investor’s own investment portfolio means, in the vast majority of cases, there is direct linkage."
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Institutional investor relationship to impacts: Directly linked
Individual, sponsor (e.g. employer, government) Asset Owner (e.g. pension fund, government ministry)
Investment manager
Company A Company B Company C
RBC Impact
BUSINESS RELATIONSHIPS
Investment portfolio
Business relationships: “Minority shareholding may be considered a business relationship under the Guidelines."
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Institutional investor relationship to impact: Contributing
“In some instances investors may be contributing to impacts caused by their investee companies and may be responsible for remediation. These situations could arise where investors wield significant managerial control over a company, for example, in certain General Partnerships.”
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Risk-based Prioritisation
- Prioritisation should be based on severity
- f risk
- Scale, scope, irremediable character
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- Building on existing frameworks (e.g. ESG integration)
- Using policy to signal prioritisation
- Recognising alignments between financial materiality
and RBC risks
Management Systems: Key considerations
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- Applying a risk-based approach
- Responding to information deficits
- Assessing credibility of information
Identifying actual and potential impacts : Key considerations
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- Leverage limitations
- Considering divestment and exclusion
- Seeking to prevent and mitigate
adverse impacts: Key considerations
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Deciding when to end a business relationship
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- Balancing transparency and confidentiality
- Expectations of non-financial disclosure in law
and among beneficiaries
- Risk mitigation through transparency
Accounting for due diligence and how adverse impacts are addressed: Key considerations
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- Establishment of a grievance mechanism
- Engagement with National Contact Points
(NCPs)
Processes to support remediation: Key considerations
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Contact