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Emerging Markets Research Project: Supporting labor improvements in investment decision-making

Emerging Markets Research Project: Supporting labor improvements in investment decision-making. Dan Viederman Presentation to Labor standards in development finance April 18, 2006. Verité.

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Emerging Markets Research Project: Supporting labor improvements in investment decision-making

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  1. Emerging Markets Research Project: Supporting labor improvements in investment decision-making Dan Viederman Presentation to Labor standards in development finance April 18, 2006

  2. Verité • Non-profit global research organization specializing in monitoring consumer products manufacturing: including footwear, apparel, accessories, electronics, toys and food • 60+ countries • Offices in China, India, Bangladesh, Philippines, Belgium, Latin America, US

  3. Verité’s work • Assessments and solutions for: • Corporations • Factories • Governments • Investors • Range of activities • Social auditing • Training/capacity building • Consultation/program design • Research

  4. The CalPERS Emerging Markets Research Project • CalPERS and NYCERS emerging markets investments • Assessing “ability to support institutional investment” through “Permissible Countries List” • 27 countries

  5. CalPERS Investment Criteria • Five Market Factors • Market liquidity and volatility • Market regulation/investor protection • Capital markets openness • Settlement proficiency • Transaction costs • Three Country Factors • Political stability • Transparency • PRODUCTIVE LABOR PRACTICES • VERITE CONTRACTED TO PROVIDE

  6. Investment Criteria: Productive Labour Practices • “a productive workforce is a critical factor in economic growth and, ultimately, equity market success” Wilshire Assoc. report to CalPERS • Focus of research • “To facilitate economically-productive labor practices, markets shall be evaluated based on their ratification of and adherence to the International Labour Organization’s principles … and the degree of effectiveness of implementation”

  7. Research Methodology: Range of sources • Desk research: publicly available documents • In-country interviews by country nationals • Government • Business and trade associations • Trade unions • Non-governmental organizations • Verite on-the-ground knowledge from audits, training, etc.

  8. Research Methodology: Criteria • 4 ILO Core Convention Areas • Child labor • Forced labor • Freedom of association • Equality/Discrimination • 4 functional areas • Convention Ratification (10%) • National legislation (25%) • Institutional capacity (15%) • Effectiveness of implementation (50%)

  9. Calculations - outcomes 41 specific indicators Scoring/assessment Permissible/ impermissible Risk factors Forward- Looking factors Increasing depth

  10. Reactions: Finding meaning in this investment decision • Positive news for social investors: • Expansion of fiduciary responsibility for these investors • Opportunity to engage country governments • About $2 - 3 billion more in socially-screened portfolios

  11. Reactions: Finding meaning in this investment decision • Questions/concerns for social investors: • Exclusion, not engagement • Will it help workers directly? • Will it make for more productive investments? • Danger of a backlash

  12. Next steps: What’s possible? • Engage with countries instead of excluding them • Use this framework as a guide to priorities for capacity building • Extend to company-level decision-making • Active portfolio management will examine ILO standards and Global Sullivan Principles • Include emerging markets operations • Adapt this framework for use in decision-making by other investment institutions

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