INVESTING IN

TRANSFORMATIONAL
GOVERNANCE

A BUSINESS BRIEF
TABLE OF CONTENTS

I. Introduction 4

II. Why Should Investors Take an Active Role 5

in Relation to TG?

III. Obstacles to Investor Engagement on TG 8

IV. Opportunities for Investors to Advance 9

TG Internally

Due Diligence
Regulation
Enhanced Due Diligence in
Conflict Areas
Due Diligence in Relation to
Equitable Taxation Practices

V. How Investors Can Advance TG Externally 13

VI. Conclusion and Recommendations 16

Key References 17
ABOUT THE THINK LAB ON
TRANSFORMATIONAL GOVERNANCE

This Issue Brief was created in consultation with the participating companies and partner
organizations of the United Nations Global Compact Think Lab on Transformational Governance.
It provides an introduction to the role of business in Sustainable Development Goal 16, covering
transformational governance’s foundation and meaning, priority actions for businesses, relevant
areas of work and the business case. This Brief summarizes the discussion held on Investors &
Transformational Governance in October 2023.

Disclaimer: The views expressed in this Issue Brief are not necessarily those of the United Nations Global Compact nor of the participants
and partners of the Think Lab on Transformational Governance. The inclusion of company names and/or examples is intended strictly
for learning purposes and does not constitute an endorsement of the individual companies by the United Nations and authors of this
brief. The brief has benefited from the input of the organizations comprising the Think Lab on Transformational Governance but does not
represent the views or positions of the businesses and stakeholders with which these organizations work. The material in this publication
may be quoted and used, provided there is proper attribution.

A Transformational Governance Approach The Think Lab on Transformational Governance

Transformational governance (TG) is not a new
legal concept but a principles-based approach that
calls on businesses to be accountable, ethical,
inclusive and transparent internally and externally.
Unlike traditional corporate compliance, which
requires companies to only meet current laws
and regulations, TG asks not just what is legal
but also what is right. It offers a comprehensive
view for businesses on internal governance and
on contributing to strengthening institutions of
public governance, enabling businesses to integrate
policies benefiting themselves, their stakeholders
and the societies in which they operate.
About the Think Lab on Transformational
Governance
The Think Lab on Transformational Governance
aims to shape and define business and
thought leadership on critical areas linked to
transformational governance, address key business
challenges, identify policy advocacy opportunities
and good business practices and scale up learnings
through the network of the UN Global Compact.
Business participants include: Aceros de
Guatemala, America Movil, ARGE Consulting,
Astellas, Baker McKenzie, Bennett Freeman
Associates, Cemex, Clifford Chance, Empresas
CMPC S.A., Diageo, DLA Piper, Edotco Group, Enel,
EOH, Empresas Públicas de Medellín, KenGen,
Linklaters, Oando, Oxford University, Pearson, PT
Austindo Nusantara Jaya Tbk (ANJ), RELX, SAP,
Siemens Energy and Thomson Reuters.
Further partners and contributors to the Think Lab
consultations include: Chatham House, First Sentier
MUFG Sustainable Investment Institute, Pensions
& Investment Research Consultants Ltd., UN
Principles for Responsible Investment, and Workiva.
thanks the business participants for their input and
contribution to develop this brief and thanks Harriet
Moynihan and Bennett Freeman, Associate Fellows
in the International Law Program at Chatham House,
for their contributions.
Transformational Governance
Self-Assessment Tool
The TG self-assessment tool provides a framework
for companies to engage with and apply the
principles of transformational governance. It is
structured in such a way that allows businesses
to assess their status quo on the spectrum of
transformational governance, both with regard to
their own operations as well as in relation to their
business partners, suppliers and downstream
activities. It also considers companies’ engagement
and collaboration with external stakeholders to
strengthen peaceful, just and inclusive societies. For
each area of transformational governance, the tool
contains a set of criteria providing businesses with
a detailed understanding of any key gaps in their
current approach as well as opportunities to further
strengthen their policies and procedures, mapped
against relevant SDG 16 targets. It also contains
recommendations on potential next steps as well
as selected resources and additional guidance to
support companies in transforming their governance,
both internally and in the communities where they
operate.
https://tgtool.unglobalcompact.org
This Brief was developed thanks
to the contribution of our patron
Enel and sponsor Relx.

3
I.
INTRODUCTION

The transformational governance (TG) initiative is a principles-based approach that calls on business to be more accountable,
ethical, inclusive and transparent both internally and externally. It aims to drive responsible business conduct, improve ESG
performance and strengthen public institutions, laws and systems. The TG portfolio draws on the extensive work of the UN Global
Compact on anti-corruption and integrity, business support for the rule of law, the role of general counsel in upholding corporate
sustainability and the relationship between business and peace. It also responds to the ambitious 2030 Agenda to advance the
Sustainable Development Goals (SDGs). This has heightened the demand for the private sector to address societal challenges --
including through SDG 16 on peace, justice and strong institutions.

Since the launch of the UN Global Compact in
2000, there have been growing expectations
that businesses should play a greater role in
supporting strong and effective governance
anchored by the rule of law. The UN Guiding
Principles on Business and Human Rights set
out the fundamental responsibility of business to
respect human rights and address adverse human
rights impacts with which they are involved.
In recent years, companies and investors have
devoted much more attention to environmental,
social and governance (ESG) issues. The SDGs
provide a global framework to help businesses
contribute to specific sustainability objectives.
Yet beyond these important developments, a
broader, deeper agenda has also emerged: the
case for the private sector to address and support
the fundamental underpinnings of a sustainable
and profitable business and investment
environment, with strong institutions, the rule of
law, a healthy civic space and equitable taxation.
The SDG 16 Business Framework | Inspiring
Transformational Governance, launched by the
UN Global Compact in 2021, encourages business
to embrace a transformational governance
approach by supporting peace, justice and strong
institutions, strengthening multilateralism and
reimagining the social contract. Inclusive and
thriving economies depend on fair, effective
tax systems, which help create the conditions
necessary for responsible investment and
sustainable growth. There is a clear connection
between sufficient and equitable taxation and TG
in particular because peace, justice and strong
institutions rely on capable governance that can
deliver public goods on which both societies and
economies depend.
This Issue Brief focuses on investors, who
have a vital but underappreciated role with
the unfulfilled potential to improve national
and global governance through their leverage
over portfolio companies or investments in
Governments. Investors’ assessments of risks
and opportunities at both the industry and
company levels can be the basis of engagement
to inform company strategies and to improve
Government policies in the interest of
stakeholders and shareholders. By engaging
with investors’ assessments, Governments can
see their policy decisions through a new lens and
have additional criteria to consider for economic
development and attracting investment. In this
way, investor priorities for companies have a
direct influence on Government policy. These
impacts have the wider effect of contributing
to an enabling ecosystem in which businesses
experience less volatility and can create long-
term value.
This Brief provides a review of key trends and
guidance to investors, drawing on insights from
an online consultation on Transformational
Governance and the Role of Investors hosted by
the UN Global Compact on 19 October 2023.
It highlights some of the barriers for investors to
engaging in TG and identifies opportunities for
investors to contribute to the fulfilment of SDG 16
targets which underpin TG, in particular through
support for the rule of law, civic space and
responsible tax practices.

4
II.
WHY SHOULD
INVESTORS TAKE
AN ACTIVE ROLE
IN RELATION
TO TG?

The SDGs underline to investors that their

returns are highly dependent on the continued
good health of the overall economy and business
ecosystem and therefore that they can improve
their financial performance by encouraging
sustainable economies and markets. TG, which
encompasses the SDG 16 business agenda,
with its emphasis on peace, justice and strong
institutions, can be situated within a wider trend:
the emergence of stakeholder geopolitics in which
a whole range of actors – not just Governments
and international institutions but also investors,
multinational companies, their suppliers and
business partners alongside civil society -- are
all important players in national and global
governance. In an increasingly complex and
turbulent world, each actor has a geopolitical
responsibility to support the foundational
elements of the societies in which they operate
and from which they benefit as well as the
underpinnings of the international community and
the global economy.

5
Calls for business to support the shared space
of the rule of law, accountable governance and
civic freedoms (in particular, the freedoms of
expression, association and assembly) have
increased as these underpinnings have come
under threat in many countries. The 2023
Freedom House Report details how global
freedoms have shrunk for the 17th year running.
These are worrying trends for business, because
the erosion of civic freedoms and the rule of
law means the erosion of a stable business
environment. When a Government curtails the
powers of the judiciary, there is less predictability
and accountability. When a Government stifles
independent media, there is less transparency
for investors and companies, making it harder for
them to conduct due diligence effectively. Both
the reliance of business on civic space — and its
responsibility to protect it — were addressed in a
June 2021 Chatham House synthesis paper,
“The Role of the Private Sector in Protecting
Civic Space”.
SDG 16 is directly tied to the civic space and
has been assessed as one of the SDGs that has
made the least progress to date, both in relation
to developing markets and developed countries.
But a recent report by First Sentier identifies
that there is a financing gap when it comes to
the fulfilment of the SDGs: a lack of available
capital is hampering progress. Investors have
made important efforts on discrete issues such
as corruption, modern slavery, forced labour
and diversity, equity and inclusion. But there has
been much less attention paid to the broader and
more fundamental underpinnings of a stable and
sustainable business environment – including the
rule of law, a healthy civic space and equitable
taxation. Weak institutions, diminished rule of
law and heightened prospects of conflict create
systemic risks for investors, which are financially
material for international capital flows and
need to be factored into de-risking analysis.
Yet the crucial relationship between investors
and the fundamental SDG 16 underpinnings
reflected in TG have remained a relative blind
spot, as explored in a July 2023 Chatham House
research paper “Investors and the ESG blind spot:
Upholding civic freedoms as part of geopolitical
corporate responsibility.”
Similarly, tax responsibility should be at the heart
of transformational governance but is currently
not getting enough attention. Governments need
sufficient revenues and effective governance
to make progress on the SDGs—and to deliver
public services and meet their fundamental
responsibilities. Companies shifting profits
and thereby avoiding taxes has effects across
countries, but in the context of the SDGs, one
dollar lost to tax avoidance in developed markets
does not have the same impact as in developing
markets, because many developing markets
depend disproportionately on revenue from
corporate taxes. This is because developing
markets lack the resources to administer other
forms of taxes, such as labour taxes or VAT, partly
due to high levels of informal employment.
More work is needed to demonstrate to
investors the benefits of progress on SDG 16
and, conversely, the systemic risk to investment
posed by the failure to make progress on these
vital issues of capacity and equity.
6
 MORE WORK IS NEEDED TO
DEMONSTRATE TO INVESTORS THE
BENEFITS OF PROGRESS ON SDG 16
AND, CONVERSELY, THE SYSTEMIC RISK
TO INVESTMENT POSED BY THE FAILURE
TO MAKE PROGRESS ON THESE VITAL
ISSUES OF CAPACITY AND EQUITY.

7
III.
OBSTACLES TO INVESTOR
ENGAGEMENT ON TG

One reason for a lack of investor engagement in TG, and on related issues such as civic space and equitable taxation, is that
investment decisions are typically predicated on value, growth and credit risk. The focus on annual return on investment
encourages short-term thinking, with less attention paid to systemic risks that could be just as detrimental to financial stability
over the longer term. Investors currently account for major political risks such as a change of Government or major new
regulations. But they often fail to factor in more subtle changes to a political environment, such as new laws that make it harder
for NGOs to operate or increasing Government controls of social media.

Another barrier to investor engagement in issues
of TG is the difficulty of measuring and integrating
these foundational issues into traditional investor
methodology. Investors rely on data, but it is hard
to reduce TG objectives into a single metric. It is
easier to measure a company’s carbon footprint,
or the number of women in the workforce, than
to measure a company’s efforts on supporting
peace, justice and strong institutions. These
issues require more sophisticated due diligence,
involving consultation with external experts that
are tracking trends and developments.
Investors also must balance the diverse
and sometimes diverging interests of host
Governments and home Governments,
shareholders and stakeholders, employees and
the public. Engagement with host Governments
may raise political sensitivities as values and
interests diverge and in turn complicate a
company’s ability to maintain both the formal
legal and informal social license to operate in that
country. For example, when a Government enacts
legislation imposing internet shutdowns to deter
protests against its policies or suppresses human
rights defenders, the company in question has
a dilemma as to whether to continue operating
in that country, exit the country or try to use its
access and potential leverage to urge change
from within.
Investors also face a raft of different disclosure
regimes and regulations in relation to
sustainability and human rights issues, with
some jurisdictions (including the EU and US)
taking different approaches, which has led to a
complex and fragmented regulatory landscape.
This challenge has been further complicated by
a backlash against ESG in the US, arising from
issues both of political ideology and technical
methodology. Both sets of issues raise questions
about the efficacy and credibility of ESG ratings,
which in turn have compelled some investors
to lower the visibility of their efforts. There are
significant initiatives to improve the system, with
the International Sustainability Standards Board
working to strengthen the quality and consistency
of ESG data landscape, but these do not address
some of the wider and even more fundamental
governance issues captured by SDG 16.
As to taxes, companies can be nervous about
disclosing data on payments they make in
jurisdictions where their competitors do not
make such disclosures, for fear of suffering
a so-called first mover disadvantage. But
over time, it has been shown that being more
transparent about tax practices has not been a
disadvantage, particularly in the energy space,
where transparency around contracts, including
tax royalties, has been increasing.
Finally, there is sometimes a language and
understanding gap between the investment
and human rights sectors, which can create
barriers to effective communication, trust and
understanding. This is illustrated by the difference
in due diligence approaches between the two
sectors. Financial due diligence primarily uses
a risks-to-business lens, while human rights
due diligence a risks-to-people lens. This is
captured through double materiality in reporting
frameworks, hence developing a unified language
and integrated assessment methods that
consider the range of SDG 16 factors is essential
for bridging this gap.

8
IV.
OPPORTUNITIES FOR INVESTORS
TO ADVANCE TG INTERNALLY
Many investment assets are based in developed countries and invested in companies in developing countries. This creates an
SDG 16 risk through the value chain that should raise questions such as whether the money is invested, then used for ends that
support or at least not undermine peace, justice and strong institutions and how investors can track such risks and outcomes.
DUE DILIGENCE
The answers lie in enhanced due diligence that
enables investors to identify and mitigate more
systemic risks to institutions, the rule of law and
civic space. The type of due diligence required
will depend on the type of investor, where
the investment is made, what the investment
structure looks like (including the asset class)
and the degree of influence that the investor can
exert. Institutional investors have increasingly
robust due diligence processes.
For example, some asset management firms
are integrating new due diligence criteria that
consider country risk, sector risk and company
risk and which keep the application of the
criteria under constant review to ensure that
it is up to date. This strategy, informed by an
increasing array of tools available to track these
different kinds of risk, has led to the exclusion
of companies supporting harmful regimes or
practices, indicating a more stringent approach
to ensuring that investments contribute positively
to SDG 16.
A recent Global Survey of Practitioners conducted
by Workiva, taken among 926 professionals
worldwide, found that 62 per cent of executives
strongly agree that their company applies the
same diligence to ESG reporting as it does to
financial reporting – but just 32 per cent of
managers say the same, indicating a disconnect
in perceptions. As managers are likely to be
closer to the data, this suggests that companies
need to pay greater attention to ESG factors and
systemic risks. The Principles for Responsible
Investment (PRI) and the Investor Alliance
for Human Rights (IAHR) work closely with
investors and companies to advise and guide on
strengthening due diligence processes.
There are also external software platforms
available to help investors and companies access
trusted data in their due diligence processes,
improve ESG disclosures and track progress
towards the SDGs.
From a country risk perspective, there is a
significant gap in investors’ evaluation of
Government bonds, especially in terms of whether
the Governments benefiting from that investment
allocate public funds to its institutions, the rule of
law and civic space. Often, the countries concerned
focus more on military spending over critical
sectors like education and the judiciary, which
undermines the SDG 16 objectives of peace, justice
and strong institutions. It is therefore critical for
investment companies to evaluate Government
spending with more scrutiny. Investment companies
should put a big question mark of systemic risk over
Governments that are not investing or performing
sufficiently, especially on these building blocks of
stability and prosperity.
Credit ratings agencies, which provide assessments
for investors about the creditworthiness of
bonds issued by corporations, Governments and
packagers of asset-backed securities, have been
slow to factor in ESG issues and rarely if ever
factor in the more foundational issues captured in
SDG 16. PRI has a valuable initiative to promote
dialogue among investors, issuers and credit ratings
agencies on ESG, which could be broadened to
cover more foundational issues of the rule of law,
civic space and strong institutions. Index providers,
which offer a basket of funds and decide which
funds to include, should also add political and
social risk more explicitly and consistently into their
decisions on inclusion.
9
REGULATION
In recent years, there have been some positive
developments that make it easier for investors
to navigate these challenges. In particular,
investors have encouraged Governments to
require companies to conduct human rights due
diligence through mandatory human rights due
diligence laws, and the emergence of hard law
requirements in this area has become a trend
across many jurisdictions. While some of these
laws focus on specific issues such as modern
slavery, as distinct from the broader issues
that fall within SDG 16, the EU’s Corporate
Sustainability Due Diligence Directive, which
is due to be adopted in 2024, has a broader
scope, including rights relevant to civic space
such as the rights to association, assembly,
liberty and privacy. The draft Directive will have
extraterritorial effect since it obliges in-scope
companies both based in the EU and with
turnover in the EU to identify and mitigate adverse
human rights impacts all the way through their
supply chains. The EU and Governments can raise
standards worldwide through such legislation;
a company in Mexico recently raised its human
rights due diligence standards as a result of
pressure from a German law requiring it.
There may need to be some flexibility and
sensitivity in relation to sectors that require time
to transition to compliance with a new regulatory
framework. In the case for example of Mexican
pension funds which deal with sectors such as
agribusiness, moving away from child labour or
illicit crop cultivation – which in some cases may
take place as a survival mechanism -- requires
working with communities on the ground to
understand the challenges they face.
Companies may also require investment to
support them as they make the transition into
compliance with human rights standards and
ensure their investments are sustainable,
particularly in emerging markets in lower
income countries.
Regulation of fair and equitable tax practices
is more challenging. Tax responsibility means
companies not only ensuring they do not evade
tax (which is illegal) but also ensuring that they
do not avoid it by reducing their tax liability
through actions that are legal but almost always
in contradiction with the intention of the law. The
reality is that Governments cannot close all the
loopholes that businesses can exploit on tax, as
policymakers simply cannot foresee all forms of
tax planning. Therefore, the onus has traditionally
fallen on companies to act reasonably and
responsibly and not exploit tax loopholes so
aggressively as to degrade the governance
capacities of countries where they operate.
The OECD Guidelines on Multinational Enterprises
call on companies to comply with both the
spirit and intention of tax laws. Investors should
advocate for clear reporting on corporate tax
practices and revenue sources, aligning with
global standards to support the SDGs. Such
measures are essential for understanding and
mitigating risks within investments related to SDG
16. There is also an emerging trend for mandatory
regulation, for example in the asset management
space, where there are requirements to collect
more data from companies, particularly in the EU.
10
Investors should link the ENHANCED DUE
political and geopolitical DILIGENCE IN
risk assessments that CONFLICT AREAS
they have been conducting
for decades with such In conflict situations, enhanced due diligence is
required. Bodies such as the Heartland Initiative
enhanced human rights help institutional investors to evaluate portfolios
by identifying and prioritising those with severe
due diligence. and systemic risk, including where there is a risk
of armed conflict. By focusing on systemic risk,
investors can address a broader array of issues
than with a discrete focus on issues such as child
labour and forced labour – important though
they are.

Recent reports from B4Ukraine highlight the

extraordinary lack of human rights due diligence,
at least disclosed publicly, that appears to have
been applied to the Russia/Ukraine context since
2022. Investors can play a catalytic role – with
support from PRI, IAHR, the Heartland Initiative
and others – to try to encourage the companies
in which they invest to conduct enhanced human
rights due diligence in relation to their operations
in conflict-sensitive areas. A tangible step that
investors should take is to link the political and
geopolitical risk assessments that they have
been conducting for decades with such enhanced
human rights due diligence, melding longstanding
and emerging tools to identify and diminish
such risk.

It is also important that investors think about

responsible entry into emerging markets that
may carry systemic risks as well as the issue
of responsible exit. Companies should establish
threat risk thresholds for emerging markets.
They have been reluctant to do so to date, as
it may inhibit access to those markets for new
products and services which may seem lucrative
in the short term. But it is in the interests of
companies for their policies and governance
measures to anticipate, not just react to, risk.
Rather than waiting until a conflict breaks out,
which (as has been seen in the context of Russia’s
full-scale invasion of Ukraine) causes severe
problems for business, investors and companies
should pay greater attention upfront to indicators
like domestic civil and political rights, state
fragility and conflict risk.

11
DUE DILIGENCE
IN RELATION
TO EQUITABLE
TAXATION PRACTICES

Any investor interested in the SDGs should also be interested in their investee companies’
tax practices. For universal owners with diverse long-term portfolios, investment returns
are dependent on the continuing good health of the economy, which means efficient tax
systems alongside the proper management of public funds based on the principles of integrity,
transparency and accountability. Taxes are essential to deliver funding for the critical public
services on which investment returns rely. Even for those investors that may not yet have
engaged on the SDGs, tax is also relevant at the company level with increased Government
scrutiny on tax affairs (for example, the OECD’s proposal for a minimum tax, among other
developments).

More investors are starting to look at companies’ tax profits as a proxy for good governance.
Conversely, when senior management dedicates too much time to tax planning at the expense
of other advantages, it may indicate that the company is too focused on the short term. When
an investor is assessing the ESG credentials of a company, it should be a red flag if the company
does not mention tax, as companies with ambitious ESG programmes will do so.

Companies should publicly report their revenue sources and tax practices in alignment with global
standards like the GRI, a voluntary disclosure framework. This transparency is a fundamental step
towards assessing how corporate tax practices align with and support the SDGs.

12
V.
HOW INVESTORS CAN ADVANCE
TG EXTERNALLY
Shareholder advocacy is one important way in which investors can influence positive action in relation to TG and thereby SDG 16,
whether to support the rule of law, civic space or equitable taxation. For example, so far there has not been a big uptake in terms
of country-by-country reporting on tax under the GRI voluntary disclosure framework. This issue is particularly rife in big tech,
since in the digital age, multinational companies can hold intangible assets in overseas affiliates, i.e., countries with lower tax rates
than the home country.
Some institutional investors and others have
filed shareholder resolutions recently at both
Microsoft and Amazon to try to force those
companies to make country-by-country tax
disclosures. The shareholder resolution at
Microsoft was challenged, but the U.S. Securities
and Exchange Commission ruled that it was not
overly prescriptive to ask a company to disclose
such information in line with the GRI framework.
Investors should use shareholder models to push
companies for that public country-by-country
reporting in relation to the countries from which
they derive revenue, which will encourage the
company to take a leadership position on it.
Collaboration with industry bodies and civil
society can also help investors to better
understand the link between TG and a profitable
business environment and also benefit from
guidance on how to improve processes, including
due diligence. Some types of investors are more
active on issues such as the rule of law and civic
space than others. Many institutional investors
have been conducting more active stewardship
of their portfolio companies, encouraged by
bodies such as the UN Global Compact, the PRI,
the IAHR and civil society in order to understand
where the risks are across investment portfolios
and to prioritise action in relation to high-risk
sectors or countries. The PRI’s paper on “How
and Why Investors Should Act on Human Rights”
articulates the responsibilities that investors
have in line with the UN Guiding Principles on
Human Rights and the OECD Guidelines for
Multinational Enterprises.
The PRI has also published a “Five-Part
Framework on Investing with SDG Outcomes”
to help investors understand the real-world
outcomes of their investments (including
unintended outcomes) and to set policies and
targets to shape investment outcomes that are
in line with the SDGs through activities such
as investment decision making, stewardship
and policymaker engagement. In addition to
independent investor activity, it is important
that investors work with other financial market
participants to help shape outcomes as well as
partner with those outside the financial system,
including civil society.
Private investors typically have fewer guardrails
in relation to human rights, civic space and the
rule of law, yet they can exert significant power
and influence over developments that affect
society, especially because private funding
powers the evolution of much of the technology
sector, including AI. In the last few years, civil
society organizations have strengthened their
engagement with venture capital and private
equity firms to increase awareness of human
rights and civic freedoms and help guide private
investors on how to meet their responsibilities.
Advocacy in the form of public statements is
another way for investors to engage externally
to support TG and thereby the targets of SDG 16.
There have been several recent examples of how
investors have made public statements in support
of the rule of law and accountable governance
in situations of armed conflict. Following the
February 2021 coup, a July 2021 Investor
Statement on Human Rights and Business in
Myanmar called on “companies to uphold their
corporate responsibility to respect human rights
by undertaking enhanced human rights due
diligence.” The Investor Alliance for Human
Rights, Heartland Initiative, the EIRIS Conflict
Risk Network and other investor advocates
have continued to engage companies to assure
accountability, either for their continued presence
or responsible exit.
13
 CIVIL SOCIETY ORGANIZATIONS HAVE
STRENGTHENED THEIR ENGAGEMENT
WITH VENTURE CAPITAL AND PRIVATE
EQUITY FIRMS TO INCREASE AWARENESS
OF HUMAN RIGHTS AND CIVIC FREEDOMS
AND HELP GUIDE PRIVATE INVESTORS ON
HOW TO MEET THEIR RESPONSIBILITIES.

14
There have also been
significant efforts by
investors in recent years
in relation to digital rights,
particularly in opposing
network shutdowns which
have been on the rise in
countries around the world.
In May 2023, an Investor Statement on the
escalating violence by military factions in
Sudan coordinated by the Investor Alliance for
Human Rights, EIRIS Conflict Risk Network and
Heartland Initiative noted that “the restoration
of the political transition towards an inclusive,
civilian, democratic government underpinned by
respect for fundamental rights and freedoms
is essential to a stable and prosperous Sudan
with a thriving civil society and economy.” The
Heartland Initiative organized a May 2022
Investor Statement on the Crisis in Ukraine,
which “strongly condemns the Russian military
invasion and the ongoing war of aggression
against Ukraine” and urges enhanced human
rights due diligence and other steps to “advance
the investor and corporate accountability
necessary for a functioning global economy and
the rules-based international order.”
There have also been encouraging statements
and actions by investors in support of civic
space, ranging from helping to end forced labour
in cotton in Uzbekistan to supporting freedom
of association in Bangladesh and Cambodia,
particularly in the garment sectors in both
countries. There have also been significant
efforts by investors in recent years in relation to
digital rights, particularly in opposing network
shutdowns which have been on the rise in
countries around the world.
The first half of 2023 saw a mobilisation by the
tech community in Israel, including venture
capitalists, in support of the rule of law and an
independent judiciary. Some Australian investors
along with companies also supported the Right to
Voice for the indigenous community in the recent
constitutional referendum held by the Australian
Government, even if ultimately the proposal
was rejected.
15
VI.
CONCLUSION AND
RECOMMENDATIONS

The following conclusions and recommendations are informed by the UN Guiding Principles on Business and Human
Rights, the OECD Guidelines on Multinational Enterprises, the SDG 16 Business Framework | Inspiring Transformational
Governance and other documents cited. They are also informed significantly by the presentations and discussion
at the 19 October 2023 UN Global Compact consultation:

• TG is critical for investors because weak • Investors should push for greater
institutions, diminished rule of law and transparency on corporate tax practices
unstable Government are systemic risks and revenue sources, aligning with global
that are financially material for capital standards to support the SDGs, and press
flows.Similarly, tax governance is financially for inclusion of responsible tax practices in
material because Governments depend on regulation and ESG indicators.
tax revenue and its effective management
• Investors should use shareholder advocacy
to support strong institutions and
to influence positive action in relation to TG
governance capabilities.
and thereby the targets of SDG 16, including
• Currently, many investors focus on ESG through the filing of resolutions where there
and human rights issues but often in are concerns about the rule of law, civic
siloed and piecemeal ways. There is a space or tax transparency.
need for investors to take a more holistic
• Investors can benefit from partnerships with
view of their operations, factoring in the
industry bodies, multi-stakeholder initiatives
underpinnings of a stable and sustainable
and civil society organisations to identify the
business environment: the rule of law, civic
links between TG and a profitable business
space and strong institutions.
environment and to adapt their processes in
• Institutional investors should factor TG support of SDG 16.
issues into their stewardship of portfolio
• Public statements by investors, in alliance
companies, particularly in sectors and
with bodies such as the IAHR and PRI, can
countries where there are the highest risks
provide powerful signals of support for the
to peace, justice and institutions. Investors
rule of law and accountable governance in
in Government bonds, along with credit
situations of conflict or where civic space is
ratings agencies and index providers,
under pressure.
should also factor TG issues into their risk
assessments and decision making.
• Regulation from Governments and the EU
to mandate human rights dWue diligence This consultation and Brief feeds into
across supply chains is helping to raise a corporate toolkit on transformational
due diligence standards worldwide, which governance, an output of the TG Think Lab,
in turn can help investors have greater which includes a self-assessment tool
visibility towards risks to human rights. But for businesses.
that due diligence should be combined with
political and geopolitical risk, which factors
in systemic risks to institutions, justice and
peace, in order to support and advance TG.

16
KEY REFERENCES
Atlantic Council
Fractured Foundations: Assessing Risks
to Hong Kong’s Business Environment
B4 Ukraine
From Compliance to Conscious: Foreign Companies
in Russia Fail to Meet Human Rights Obligations
Business and Human Rights Resource
Centre
Shared Space Under Pressure: Business Support
for Civic Freedoms and Human Rights Defenders
Chatham House
Investors and the ESG Blind Spot
Geopolitical Corporate Responsibility Can Drive
Change
The Role of the Private Sector in Protecting Civic
Space
Freedom House
Freedom in the World 2023
First Sentier
Time for Action? The Role of Sustainable Investing
in bridging the SDG Financial Gap
Foreign Affairs
The Dawn of Stakeholder Geopolitics
Human Rights Measurement Initiative
Rights Tracker
Interfaith Center on Corporate
Responsibility
On the Tenth Anniversary of Rana Plaza Tragedy,
Investors Call on Companies to Prioritise Worker
Safety in Global Apparel Supply Chains
International Monetary Fund
Tax Policy for Developing Countries
Investors for Human Rights
Investors with $5 Trillion Call on Government to
Institute Mandatory Human Rights Due Diligence
Measures for Companies
Investors and Geopolitical Pressures: Risks and
Responsibilities; Interests and Values
Investor Statement on Human Rights and Business
Activities In Myanmar
Joint Statement on the Situation in Sudan
Investor Statement on the Crises
in Ukraine
Investor Statement on the Crises in Ukraine
Natural Resource Governance Institute
Unfinished Business: Contract Transparency in the
Extractives Industries Transparency Initiative
Office of the High Commissioner
for Human Rights
Investors, ESG and Human Rights
United Nations
Sustainable Development Goals Progress Chart
2022
Role of Business in Realising the Right to
Development
United Nations Development Project
Heightened Human Rights Due Diligence for
Business in Conflict-Affected Contexts
United Nations Global Compact
SDG 16 Business Framework | Inspiring
Transformational Governance
United Nations Principles for
Responsible Investment
ESG, Credit Risk and Ratings: Part 4 - Deepening
the Dialogue Between Investors, Issuers, and CRAs
Why and How Investors Should Act on Human
Rights
Investing with SDG Outcomes
Workiva
2023 Global ESG Practitioner Survey
17
THE TEN PRINCIPLES OF THE
UNITED NATIONS GLOBAL COMPACT
HUMAN RIGHTS
1 Businesses should support and respect the
protection of internationally proclaimed
human rights; and
2 make sure that they are not complicit in
human rights abuses.
LABOUR
3 Businesses should uphold the freedom of
association and the effective recognition of
the right to collective bargaining;
4 the elimination of all forms of forced and
compulsory labour;
5 the effective abolition of child labour; and
6 the elimination of discrimination in respect
of employment and occupation.
ENVIRONMENT
7 Businesses should support a precautionary
approach to environmental challenges;
8 undertake initiatives to promote greater
environmental responsibility; and
9 encourage the development and diffusion of
environmentally friendly technologies.
ANTI-CORRUPTION
10 Businesses should work against corrupti-
on in all its forms, including extortion and
bribery.
ABOUT THE UNITED NATIONS
GLOBAL COMPACT
As a special initiative of the United Nations Secretary-Gen-
eral, the UN Global Compact is a call to companies
worldwide to align their operations and strategies with Ten
Principles in the areas of human rights, labour, environment
and anti-corruption. Our ambition is to accelerate and scale
the global collective impact of business by upholding the
Ten Principles and delivering the Sustainable Development
Goals through accountable companies and ecosystems that
enable change. With more than 20,000 participating com-
panies, 5 Regional Hubs, 62 Local Networks covering 67
countries and 15 Country Managers establishing Networks
in 34 other countries, the UN Global Compact is the world’s
largest corporate sustainability initiative — one Global Com-
pact uniting business for a better world.
For more information, follow @globalcompact on social
media and visit our website at unglobalcompact.org.
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