More work to do on ‘S’ in ESG

Yasmine Raso

Senior Journalist, Financial Newswire

26 April 2023

The sustainability head at Australian fund manager, Ausbil Investment Management, has reaffirmed the role investors play to engage companies on environmental, social and governance (ESG) issues.

The comments from Head of ESG, Måns Carlsson, follow his visit to the Rana Plaza building in Bangladesh on the 10-year anniversary of its collapse, which caused the deaths of over 1,000 people and uproar within the fashion and investment industries.

Carlsson said investors played a significant part in persuading retailers in Bangladesh to sign the Bangladesh Accord, enacting a risk management framework that helps reduce the threat of any other safety tragedies. He also said investors can get involved in enforcing companies adhere to a high standard related to the social issues as part of ESG, particularly with labour rights.

“Having recently visited garment factories in Bangladesh, it is clear that the Accord has played a key role. However, while the risk of a similar incident in a tier 1 factory used by global brands is significantly lower today, there are still risks in other places,” he said.

“Also, investors should also note that many underlying labour rights issues remain in the Bangladeshi garment industry, such as the lack of a living wage, lack of unionisation and too much reliance on traditional social audits, which don’t always uncover the issues.

“Labour rights issues are a systemic risk, which means it makes sense for investors to collaborate on engagements, to compliment individual company engagements that we do.

“I think the role we investors should play is to identify what we believe is best practice on responsible sourcing globally and then engage with companies and encourage them to take that up. This is similar to how we engage on other ESG issues too.”

Carlsson also flagged the potential for increased regulation around ESG factors and standards, signalling their importance to be enshrined and enforced.

“I’ve been in ESG research for 16 years, and I must say the last two or three years have probably been busier than all the years prior. And I think that trend’s going to continue,” he said.

“ESG factors are becoming more and more important and there’s more regulation coming in internationally. Domestically, the Modern Slavery Act in Australia is under review and there’s going to be some changes made to that. There can be additional regulation too.”