Equipped with a report card produced by the CWC that examined State Street Global Advisors’ (SSGA) stewardship framework and practices, trustees from three Australian superannuation funds and the CWC Secretariat staff met with the asset manager at its Boston headquarters in early June.

SSGA has a tremendous voice in capital markets. It is the third largest asset manager in the world. Together, SSGA, BlackRock and Vanguard are the largest shareholders in over 40% of listed companies in the US.

A significant percentage of the money these asset managers invest is the deferred retirement savings of workers, accumulated in collectively funded schemes such as pensions and superannuation funds. Many of these funds are governed by boards that include worker-nominated and/or union-nominated members.

The worker-nominated trustees whose funds contract asset managers like SSGA have a unique and powerful role in capital markets. They sit at the top of the investment chain and oversee the retirement savings of millions of workers. Yet the asset managers they engage often invest workers’ capital in a way that undermines workers’ rights. This is where the CWC Asset Manager Accountability Initiative comes in.

The SSGA report card is the first in a series: The CWC Asset Manager Accountability Initiative is producing report cards to evaluate the stewardship performance of ten global asset managers headquartered across the world.

The idea behind the initiative is not to simply produce more paper: The CWC is engaging its global network of trustees to meet with the asset managers they contract to raise priority issues and build accountability.

At our meeting with SSGA, we raised concerns detailed in our SSGA report card regarding the absence of references to workers’ human rights or labour standards in the company’s responsible investment policies and stewardship activity reports.

The new R-Factor™ ESG data tool that SSGA has developed to guide its investment decision-making and stewardship work is based on SASB’s materiality map, which identifies very few labour practices as a “material issue” and overlooks the responsibilities of companies under international norms and frameworks.

We explained that this reliance on SASB can make it difficult for investors to effectively assess whether workforce issues may compromise a company’s long-term success. We suggested that adding workers’ human rights indicators drawn from the CWC Guidelines for the Evaluation of Workers’ Human Rights and Labour Standards and the Workforce Disclosure Initiative, which we encouraged SSGA to join, would allow SSGA to gain a clearer picture of a company’s approach to labour and workforce issues.

A materiality-focused lens might explain SSGA’s vote against shareholder resolutions that touch specifically on human rights due diligence, such as the proposal presented at Woolworth’s Group Ltd 2018 annual general meeting (AGM). It may also explain why there is little evidence of engagements that touch workforce issues, workers’ human rights and labour standards in SSGA’s publicly-available stewardship reporting in 2017-2018.

SSGA told us that social issues such as labour and inequality are the “unexplored frontier” for the company and will be prioritized in 2019. They articulated an interest in addressing systemic issues such as taxation and inequality from an investor perspective, as stewardship expectations change.

We encouraged SSGA to supplement its materiality lens with a rights-based approach that is founded in key international standards and frameworks for protecting workers’ human rights, such as the OECD Guidelines for Multinational Enterprises (MNEs) and the related responsibilities of institutional investors which clarifies expectations for minority shareholders.

Importantly, our meeting sends a signal that trustees in the CWC network, in exercising their fiduciary duty to take environmental, social and governance (ESG) issues into account, will be holding asset managers accountable. Re-affirming this accountability is an important step in transforming the global financial system so that the workers’ whose savings are invested in global markets benefit fully – now and in the future.

As SSGA further defines its narrative on social issues, which is taking shape this year, we look forward to continued constructive engagement.

To participate in the CWC Asset Manager Accountability Initiative as a trustee or trade union representative, click here or email the CWC Secretariat. We will be sharing more information on the initiative at the 2019 CWC Workers’ Capital Conference in Paris. Register now to join us.