Capturing Human Rights Impacts in ESG Data: A Case Study of ICT Companies’ Mineral Supply Chains

Joakim Thorsten Bertil Berti & Johan Axel Theodor Berg

Student thesis: Master thesis

Abstract

The interest in sustainable investing has increased substantially in recent years, and the majority of investors today incorporates environmental, social, and governance (ESG) criteria in the investment process. This has led to a vast increase in ESG data and the emergence of third-party ESG data providers dedicated to collecting, analyzing, and reporting ESG data to investors. However, there has been criticism against the quality of this ESG data, and the examples of objective and comparable data are scarce. We have therefore chosen to investigate the quality of ESG data more closely. We have narrowed down our focus to the part of ESG data related to human rights, and conducted a case study on Information and Communications Technology (ICT) companies’ mineral supply chains. We have evaluated how adverse human rights impacts associated with the extraction of minerals in Congo are captured by four ESG data providers: Arabesque, Bloomberg, Corporate Human Rights Benchmark (CHRB), and Thomson Reuters. Following our introduction, we begin by providing a contextual background. Chapter three describes how we have conducted our research, and presents primary data from ten interviews, as well as the secondary data from ESG data providers. Chapter four presents the theories that have guided us through our research, and chapter five deals with the results from our interviews. In chapter six, we discuss our findings. In our final chapter, we conclude that the chosen ESG data providers fail in capturing adverse human rights impacts in ICT companies’ mineral supply chains. We argue that the main causes of this are an overreliance on company reported data, which in accordance with impression management creates a risk for bias, as well as an overreliance on commitments or efforts metrics, which are not informative enough of ICT companies’ actual human rights impacts. We argue that ESG data providers could improve their data quality by utilizing more data sources, incorporating relevant principles and guidelines in their metrics, including data from credible organizations, encouraging companies to standardize their nonfinancial reporting, and utilizing more rules-based approaches.

EducationsMSc in Accounting, Strategy and Control, (Graduate Programme) Final ThesisMSc in International Business, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2019
Number of pages137
SupervisorsAri Kokko