ESG Ratings and Human Rights Due Diligence : How Can ESG Ratings be Used to Assess the Human Rights Due Diligence Practices of Companies?

There is increasingly an imperative for investors to incorporate human rights due diligence into their investment decision-making processes, driven both by regulatory and voluntary initiatives. However, tools for investors to assess the human rights practices of their investment universe or portfolio companies remain limited. Whereas some benchmarks exist that assess companies’ human rights practices, the scope of such benchmarks is limited. In this context, this paper examines whether and how ESG ratings can be used to proactively understand and assess the human rights due diligence practices of their investee companies. The paper finds that ESG ratings in general are not good proxies for assessing portfolio companies’ human rights due diligence processes