Norges Bank

Opinion piece

Why Are Children’s Rights an Issue for Investors?

Chronicle 16 May, by Anne Kvam, Director of Corporate Governance, Norges Bank Investment Management

From an ethical standpoint there are few issues that rank higher in importance than the protection of children’s rights. However, the effort to safeguard children’s rights is also important from a financial perspective.

Norges Bank Investment Management's (NBIM) active exercise of ownership rights seeks to safeguard the long-term returns of the fund and is based on the UN Global Compact and the OECD Guidelines for Corporate Governance and Multinational Corporations. NBIM has chosen children’s rights and child labour as one of the strategic areas for corporate governance and corporate engagement.

Recently, NBIM published a document directed towards corporations operating in high-risk sectors and high-risk countries. The purpose of this guidance pamphlet, titled “NBIM Investor Expectations on Children’s Rights”, is to specify investor expectations for corporate performance with regard to preventing child labour and promoting children’s rights.

NBIM believes that corporate behaviour which harms the rights and health of children distorts the market system in a way that threatens the legitimacy of individual companies, markets and, indeed, the global market economy. Unwillingness to assume corporate responsibility in addressing and combating the exploitation of children may be an indication of weak corporate management in dealing with externalities and risk.

In order to safeguard children’s rights in the companies in which NBIM is invested, our fundamental expectations of companies need to be clear. This work starts in the board rooms. Norges Bank strengthened its role as an active share owner in 2007, and the level of direct dialogue with companies in the portfolio was stepped up. NBIM voted on more than 38,000 proposals at more than 4,200 companies in 2007.

It is important for us to reach a mutual understanding with the companies regarding the economic impact of social issues. From an investor’s perspective, poor education and health for the coming generation of workers and consumers provide a weak and inadequate basis for future production and employment, resulting in loss for investors and businesses. It is important to underline that our goals can only be fulfilled in cooperation with local, national and international government bodies, as well as with NGOs and civil society.

With over 7,000 companies in the fund’s investment universe, it is necessary to direct our resources towards high-risk sectors and high-risk countries, as well as focus on the most serious violations towards human rights. Therefore, the “NBIM Investor Expectations on Children’s Rights” is divided into main categories with accompanying requirements.

Prevention of the worst forms of child labour and sustaining the minimum age standard is of absolute importance. As an investor we have an obligation to safeguard the working arrangements for children, encompassing hazardous and physically/mentally damaging labour. The minimum age for employment should normally not be below the age for compulsory schooling, and under normal circumstances not below 15 years. For hazardous work, the age must not be below 18 years.
Promotion of children’s welfare and governance structures are other categories NBIM evaluates when investing in companies. Large corporations should be expected, in addition to the fight against child labour, to play a role together with other stakeholders in securing the basic rights of children whose lives are affected adversely by corporate activities. Corporations must also have a corporate governance structure that facilitates realistic strategies and responses to the management of child labour and children’s rights.
Anne Kvam was appointed the Director of Corporate Governance at Norges Bank Investment Management (NBIM) in January 2008. Kvam joined the Bank from a post as legal director at Norske Skog. She has an MBA from University College Dublin and a law degree from the University of Oslo, with a specialty in international human rights. Moreover, she has sat on a number of corporate boards and also on the board of Amnesty International Norway.

Published 16 May 2008 11:00