Human progress is something that we may all have taken for granted over the years, but recent developments remind us that isn’t always the case: the data shows that severe, violent conflict is on the rise around the world. This trend in the global landscape means that investors must rethink how they manage the risk of being involved in, or contributing to, these harms.
Other developments add to the challenge that investors face. The rise in conflict has in turn stimulated growth in national military spending in Europe; and that in turn has boosted both revenues and investor interest in the arms sector and in companies positioned to benefit from this structural shift in national expenditures.
Furthermore, the military sector is being revolutionised, drawing into it a wide range of companies from the technology sector and beyond.
These changes have had the effect of dramatically increasing the exposure of businesses to involvement in violations of human rights in conflict affected and high-risk areas (CAHRA).
All of this begs the question: what are the risks of businesses contributing to, or profiting from, harms in this new landscape? Are businesses managing these risks correctly? Does the investment sector have the tools to meet its own obligations on human rights?
We are not alone here: we find that many investors are seeking guidance on how to manage portfolio exposure to CAHRA.
With this in mind, we review this area: to provide an overview of the scope and scale of the risks; to detail some of our work in managing and mitigating them; and to show how we are leading and contributing to efforts to improve how the investment sector handles these challenges.