Interest in ESG (environmental, social and governance) investing has exploded in recent years, as investors look to encourage positive change on the part of businesses. Companies that rank higher on ESG metrics seem to perform better. However, there is little agreement on what ESG means, particularly on the social side, and even less agreement on how to measure companies’ performance in these areas.
One thing we should all be able to agree on is: Children should be a key consideration in ESG.
Children make up almost one-third of the world’s population. Today’s children will also grow up to be tomorrow’s adults – our future workforce, capital owners, investors, customers, governments and community stakeholders. Investing in building an equitable world for all children and young people means ensuring the future of American businesses, markets and communities.
Even as American families receive welcome relief via the Biden Administration’s enhanced Child Tax Credits, and a proposed $3.5 trillion spending bill promises universal preschool and affordable childcare, many issues remain for children and families around the world. The COVID-19 crisis threatens to reverse hard fought gains. It also presents risks for businesses, including the risk of causing harm to children as they spend more time online using their products, risks to working parents facing school closures and home-schooling, risks to families losing their livelihood due to furloughing, and risks to communities.
Focusing on children is an investment, not a cost. What is good for children is good for all – including business. As we say at UNICEF, “Children are everyone’s business!”
All businesses impact children in some way, but children’s considerations are still something of a blind spot for most investors. Businesses and investors are usually aware of child labor risks, but there are many more business impacts on children, in the workplace, marketplace and community.
The key opportunity for investors and businesses: the first 1000 days of a child’s life, when the brain develops at an astonishing rate, never matched again later in life. Investing in this early stage can be the game changer for a child’s future.
By providing working parents with the support they need to securely bond with their babies in the first critical years of life, for example, businesses will not only achieve improvement in workforce motivation, attraction and retention – but also healthier, better-educated children, greater gender equality and ultimately sustainable growth.
Investing in children
Investors seeking to achieve social impacts through their investments would be wise to not only consider investments in children, but also investments in companies with responsible and sustainable business practices that can contribute significantly to children’s development and wellbeing.
UNICEF recognizes that the financial services industry has a potentially important role in advancing the shift towards more sustainable and responsible business practices for children. This is why UNICEF recently launched a tool for investors that provides a framework for assessing how companies manage and address risks to children.
The tool is designed to offer guidance to institutional investors, asset owners, asset managers and other actors critical to the measurement of corporate performance on human rights, including ESG researchers, ratings agencies and index providers. Recognizing that there are many approaches to assess ESG performance of companies, we have built the tool in a modular and adaptable format, while still focusing on offering practical advice and guidance.
The first step in any ESG analysis is to identify salient and material children’s rights risk in company operations, in order to assess the most relevant issues in company disclosure. After identifying these risks, the tool provides a framework of indicators that can be used to assess how well the company manages the risk and the outcomes for stakeholders.
There are a total of 36 indicators proposed in the framework, divided between the company’s overall governance response to child rights due diligence, and specific issue and function indicators. The latter includes child labor, decent work for parents and caregivers, child protection and safety, marketing to children and indicators pertaining to the environment and land use. Indicators come with a proposed five grade scoring methodology but can be adapted to suit the needs of the investor.
To complement the indicators, the tool also offers guidance on possible exclusions that are relevant to children’s rights, guidance on data collection, and a list of data sources by indicator.
The COVID pandemic also provides us with an opportunity to reimagine the world for children and implement better policies and practices to ensure that children’s rights are protected and respected. This is not about a return to the way things were. For hundreds of millions of children around the world, ‘normal’ was never good enough to begin with.
There is a clear case for investors to take the lead in advancing children’s rights within their own investment practices, as well as engaging with companies on the issue. UNICEF stands ready to play its part in supporting the investor world in this. Since 2017, we have been joining forces with Norges Bank Investment Management (NBIM), which manages the Norwegian sovereign wealth fund, to promote children’s rights in corporate supply chains. In May 2021, we announced our new partnership that promotes better business practices for child nutrition and leverages the critical role investors can play to promote child-focused ESG.
UNICEF has also initiated a collaboration platform under the principles for responsible investment (PRI) and we call on investors and asset managers to join us in integrating children’s rights within their own ESG analysis and investment decision making processes, as well as lead collective investor action on improving corporate disclosure of child rights information and business practices that respect the rights of children.
Let us seize this opportunity to build a better, greener and fairer world for all, starting with our youngest citizens.
Charlotte Petri Gornitzka is deputy executive director, partnerships, at UNICEF.