For example, a December 2019 report by Humanity United and The Freedom Fund cautioned that, while recognising the remarkable achievements in the sector over the last few years, pricing and purchasing practices in the sector still present a significant barrier for meaningful change (Praxis Labs, 2019). When it comes to interpretation and design of existing governance frameworks, some investors continue to perceive legal barriers between the responsibility to protect the financial interests of beneficiaries and consideration of ESG factors, even when these do not exist in practice. The important role of SOEs is also recognised in the Thai NAP. Increasingly strong political ties with China and concrete infrastructure development plans could help Thailand become a regional logistics hub and lower related costs. resurgence of forced or child labour in certain strategic sectors). Support, enable and promote RBC due diligence among businesses throughout the economy. This brochure provides basic information about the OECD Guidelines for Multinational Enterprises, the most comprehensive set of government-backed recommendations on responsible business conduct in existence today. is the online library of the Organisation for Economic Cooperation and Development (OECD) featuring its books, papers, podcasts and statistics and is the knowledge base of OECD's analysis and data. These concepts reflect the expectation that businesses should consider the impact of their operations and supply chains on people, the planet and society as part of their core business considerations and not as an add-on. It also envisions an implementation plan and indicators for monitoring and evaluation. The Ministry of Justice Rights and Liberties Protection Department has also initiated the Business and Human Rights Awards. Governments should consider in their recovery policies that many companies might not commit of their own accord to an RBC approach in their response to COVID-19, either because of a lack of incentive, capacity, resources or knowledge. The Policy Framework for Investment (PFI) - OECD.org The research shows that the major functions of such treaty language are, in the order of prevalence: (i) to establish the context and purpose of the treaty and set forth basic RBC principles through preamble language; (ii) to preserve policy space to enact public policies dealing with responsible business conduct concerns; and (iii) to avoid lowering standards, in particular relaxing environmental and labour standards for the purpose of attracting investment. SEC is planning capacity-building activities under the Thai NAP for listed companies. Several activities have taken place in this context over the course of 2018 and 2019. Promoting Responsible Business Conduct (RBC) in the financial sector is vital tobuildinga sustainable global economy. At the same time, while negative impacts are serious, agriculture can also positively affect the environment, for instance by trapping greenhouse gases within crops and soils, or mitigating flood risks through the adoption of certain farming practices (OECD, 2019d). PDF The role of OECD instruments on responsible business conduct in The OECD Policy Framework on Investment recognises that societies can benefit from investment in many ways, but the relationship between the volume of investment and the benefit from that investment is not necessarily linear. Responsible business conduct in the financial sector Operationalizing RBC Due Diligence amongst financial sector practitioners Promoting Responsible Business Conduct (RBC) in the financial sector is vital to building a sustainable global economy. Impact investment - products or strategies that seek to generate positive social or environmental impacts alongside a financial return. PDF Towards Responsible Mineral Supply Chains - Oecd A key element is risk-based due diligence a process through which businesses identify, prevent and mitigate their actual and potential negative impacts and account for how those impacts are addressed. ASEAN Post (2019), Are Thailands investments abroad sustainable?, 6 November 2019, https://theaseanpost.com/article/are-thailands-investments-abroad-sustainable. It would be worthwhile however to assess whether its current risk management and due diligence processes are aligned with international RBC standards like the OECD due diligences guidance and provisions in the UN Guiding Principles. Finally, lack of quality data when it comes to responsible investment strategies and measuring the financial performance of such strategies has also been raised by Thai practitioners as a central challenge, mirroring experience globally. The crisis has also increased vulnerability of already vulnerable populations such as migrant workers (IOM, 2020). The EEC strategy aims to promote mainly investments in targeted core technologies, high-impact and strategic investments. The role of OECD Responsible Business Conduct tools and instruments in . Welcome to the Global Forum on Responsible Business Conduct. Relevant actors in Thailand should assess whether this clarification is needed in Thailand. Equally, environmental aspects are significant. OECD estimates that by 2050 over 40% of the worlds population are likely to be living in river basins under severe water stress. Thai Institute of Directors Association also promotes sustainability as part of its work programmes and promotion of good corporate governance and offers a Board of the Year Award with sustainability and stakeholder views included in the criteria. PDF Responsible business conduct for institutional investors - OECD While the primary responsibility for compliance with the law does not shift, the guidance highlights that considerations around purchasing practices and price setting should be included in the assessment of the enterprises own operations as an important element of due diligence. We have launched work on due diligence in the financial sector, responsible agriculture investment, and on engagement with local communities in the extractive industries. The Department also highlighted the ongoing efforts to include human rights defenders and media in the draft of the 4th National Human Rights Plan as a new target group for special protection and the establishment of a committee for developing and advancing measures in protecting human rights defenders at risk at the Ministry of Justice. As businesses aim to 'do good while doing no harm, implementing Responsible Business Conduct standards, such as the OECD Guidelines for Multinational Enterprises, across business operations and supply chains can help gain and retain a social license to operate. Extracts from publications may be subject to additional disclaimers, which are set out in the complete version of the publication, available at the link provided. The opposite trend holds in the US and Europe, with the respective numbers at USD 78 billion (2000-08) to USD 51 billion (2009-18). More investment does not automatically lead to productivity growth, more competitive local firms or a more inclusive workforce. Howevercertain characteristics of the sector, including diverse and extensive business relationships, a complex landscape of regulatory obligations, and the nature of various transactions,can make thepractical application of effective due diligence systems challenging. If workers, trade unions, civil society or whistle blowers cannot meaningfully engage, that has a chilling effect on such processes and solutions. Thailands Export-Import Bank, EXIM Thailand, also provides support for creating investment opportunities in new frontier markets. RBC is embedded in the UN Principles for Responsible Investment Human Rights Strategy The Global Reporting Initiative (GRI) revised universal standards to align and integrate OECD RBC standard For more information, see the new OECD project on RBC and public procurement http://www.oecd.org/governance/public-procurement/procurement-and-rbc/. Thailand has also promoted RBC in other ways. 5), which underlines co-operation efforts to ensure that SOEs observe internationally recognised standards of corporate governance (EU, 2016a). It is important for Thai investors to have a full and comprehensive picture of the impacts of their business operations as well as their risk exposure, and to ensure that social and environmental risks are considered in the overall risk management calculus. Similar findings are echoed in the ILO Endline research findings on fishers and seafood workers in Thailand, published in March 2020 in the context of the ILO Ship-to-Shore project. OECD/FAO (2019), OECD-FAO Pilot project on the implementation of the OECD-FAO Guidance for Responsible Agricultural Supply Chains: Final Report, http://mneguidelines.oecd.org/Pilot-project-on-the-implementation-of-the-OECD-FAO-Guidance-for-Responsible-Agricultural-Supply-Chains-FINAL-REPORT.pdf. The NHRCT has reported that a number of complaints have been received over the course of the last few years related to SOEs and state projects, particularly on labour rights and large-scale impacts on environment and communities. The Thai NAP will be an opportunity to promote more consistent implementation of RBC principles and standards across the economy. Risk aversion in the financial markets due to COVID-19 has reached levels not seen since the global financial crisis. Thailands ambitions to be a regional leader could be particularly impactful in the context of integrating RBC considerations in the various regional trade and investment agreements and initiatives. Finally, Thailand could consider strengthening non-judicial grievance mechanisms and providing alternative forms of conflict resolution that could be considered in a staggered context. SEC (2019a), SEC and NHRC sign MOU designating cooperation for adoption of guiding principles on business and human rights to promote listed company competitiveness and sustainable growth, https://www.sec.or.th/EN/Pages/News_Detail.aspx?SECID=7497&NewsNo=64&NewsYear=2019&Lang=EN. This can help promote RBC among Thai banks and foreign banks operating in Thailand; although it would be advisable to also consider swift implementation. SEC efforts are notable in this regard. The OECD is honoured to host the first Global Forum on this topic. Further analysis and recommendations on how regulators can promote long-termism by institutional investors are available in OECD brief on Promoting Longer-Term Investment by Institutional Investors: Selected Issues and Policies (OECD, 2011). Additionally, and contrary to the trends in the US and Europe, there is an increasing number of new listings by Asian companies. UN OHCHR (2017), InfoNote on SLAPPs and FoAA rights by the UN Special Rapporteur on the Rights to Freedom of Peaceful Assembly and of Association, https://www.ohchr.org/_layouts/15/WopiFrame.aspx?sourcedoc=/Documents/Issues/FAssociation/InfoNoteSLAPPsFoAA.docx&action=default&DefaultItemOpen=1. That same month, on 25 October 2019, the Office of the United States Trade Representative announced the suspension of USD 1.3 billion in trade preferences for Thailand under the Generalized System of Preferences (GSP) based on its failure to adequately provideinternationally-recognized worker rights, highlighting longstanding worker rights issues in the seafood and shipping industries (USTR, 2019). The Guidance promotes a common understanding of RBC due diligence across sectors and has been recognised also by the ILO and the UN Working Group on Business and Human Rights. The Bank of Thailand in collaboration with the Thai Bankers Association has established the Sustainable Banking Guidelines on Responsible Lending in August 2019. Chapter 11 outlines the sectoral composition of Thai outward investment by type of investments (greenfield FDI vs. cross-border M&A). This pioneering annual event convened leading actors across the green finance community to help catalyze and support the transition to a green, low-emissions and climate-resilient global economy. Declaration on Promoting and Enabling Responsible Business Conduct in Additionally, investors representing USD1.9 trillion in AUM have also released a formal statement endorsing the recommendations in the paper as best practice. RBC means integrating and considering environmental and social issues within core business activities, including throughout the supply chain and business relationships. Thailand is a regional leader on RBC. For example, a 2018 survey by the Alternative Investment Management Association (AIMA) of 582 institutional investors worldwide showed that out of those who reported implementing an ESG strategy, 47% use exclusionary strategies, while only 21% practice full integration of ESG risk factors. Understanding, addressing, and avoiding risks material to business operations in a more comprehensive way that is, beyond financial risks can often lead to a competitive advantage. 2. Some characteristics of the seafood supply chain can be similar to other supply chains. Thai policy makers can further encourage quality data and reporting through mandating reporting against widely used and recognised frameworks, such as those developed by the Task Force on Climate Related Disclosures, Global Reporting Initiative (GRI), Sustainability Accounting Standards Board and OECD due diligence reporting recommendations. Government can also promote change by convening dialogues and peer learnings, which could feature examples of how contentious issues have been solved in other contexts. Investment protection and promotion of RBC are not mutually exclusive goals. See https://investorsforhumanrights.org/sites/default/files/attachments/2019-04/IAHR_Making%20Finance%20Work%20for%20People%20and%20Planet_FINAL.pdf, 6. Additionally, SEC has an important role to raise awareness of RBC in this context. The above considerations should be reflected in freight on board (FOB) prices together with traditional pricing considerations such as quantities being purchased, cost of materials, skill requirements, etc. It recognises that an enterprises price negotiations may contribute to cost-cutting and therefore labour, human rights or environmental impacts and recommends the enterprise to strengthen its management systems to prevent contributing to harm through its purchasing practices (see OECD, 2018). Additionally, the Department highlighted the ongoing amendment of the Witness Protection Act. Bangkok Post (2019), Cambodians to appeal ruling in Mitr Phol case, 5 July 2019, https://www.bangkokpost.com/thailand/general/1707662/cambodians-continue-battle-with-mitr-phol. SET (2019), About SR Centre website, https://www.set.or.th/sustainable_dev/en/sr/about/about_p1.html (accessed 19 November 2019). Among these challenges are poor understanding of ESG risks and lack of standardised approaches to ESG risk management (see for example State Street Global Advisors, 2018); governance frameworks which are not explicitly compatible with ESG strategies; and lack of quality data and comparative metrics on ESG issues (see Morgan Stanley, 2018). This is of particular relevance to Thailand in the context of efforts to promote Thailand 4.0 and higher value-added industries. UNDP/FAO (2019), Integrating Agriculture in National Adaptation Plans: Thailand Case Study, UNDP, Bangkok, www.adaptation-undp.org/naps-agriculture. These services include organising overseas business visits, business seminars and dialogue with business associations of other countries. Child labour and abuses of migrant workers and women are reported. In a survey by State Street, 47% of asset owners and 43% of asset managers indicated that they believe that the proper timeframe for expecting responsible investment strategies to outperform is five years or more, but only 10%20% use these time frames for actually evaluating performance. The report helps banks and other financial institutions implement the due diligence recommendations of the OECD Guidelines for Multinational Enterprises in the context of their corporate lending and underwriting activities. It could be useful to consider whether alignment with the OECD Due Diligence for Responsible Corporate Lending and Securities Underwriting can be useful in this regard, particularly when it comes to implementation of the Thai responsible banking and lending guidelines. There have also been sector or thematic policy commitments. Sustainable Finance Disclosure Regulation, ToRs for Diagnostic report on Responsible Business Conduct (RBC) in the Financial Sector in Southern Africa, ESG metrics and ratings: Mapping and gap analysis study, Workshop on Responsible Financing in BRICS DFIs: International Standards and Practices, G20 Sustainable Finance Working Groups roadmap, Principles for Unlocking Commercial Finance for the SDGs, OECD Guidelines for Multinational Enterprises, RBC is embedded in the UN Principles for Responsible Investment, The Global Reporting Initiative (GRI) revised. ILO and Walk Free Foundation (2017), Global estimates of modern slavery: forced labour and forced marriage, https://www.ilo.org/global/publications/books/WCMS_575479/lang--en/index.htm. The information and expectations should also be integrated in BOIs Thailand Overseas Investment Centre under the Thai Overseas Investment Promotion Division. RBC is an entry point for any company that wishes to contribute to the Sustainable Development Goals (SDGs) or to achieve specific economic and sustainability outcomes. Similarly, the Thai government should assess whether its own business activities, including activities conducted in partnership with the private sector, contribute to mitigating climate change while respecting human rights, and ensuring effective remedies for climate and human rights harms. Businesses and business associations, including the Joint Steering Committee on Commerce, Industry, and Banking (JSCCIB), Federation of Thai Industry, Thai Bankers' Association and Stock Exchange of Thailand organised awareness raising events and workshops to familiarise businesses with international standards on RBC and to engage in the process of developing the Thai NAP. Additionally, as CLMV countries grow, their need for infrastructure investments increases a market opportunity that Thai firms have actively ventured in to. Strong cooperation with China is also strengthening Thailands role in the implementation of the Master Plan on ASEAN Connectivity 2025. The ability of stakeholders to raise issues and engage in the due diligence process without fear of retribution is a key component of due diligence. Notably, it can also contribute to disaster preparedness and resilience overall, which is especially useful considering the risks of disruptions by climate change. A 2016 report by the UN Working Group on Business and Human Rights examined the practices with respect to current RBC and business and human rights practices of SOEs and found that there is a general lack of attention to RBC issues and that policies, guidelines and good practices are lacking at both the international and national levels (UN, 2016). OECD (2012),OECD Environmental Outlook to 2050:The Consequences of Inaction, OECD Publishing, Paris,https://doi.org/10.1787/9789264122246-en. Thailand is also the first country in Southeast Asia to sign a country programme with the OECD, where promoting/enabling RBC on the basis of the OECD RBC standards is included as a priority area of cooperation. Thailands ambitions to be a regional leader could be particularly impactful in the context of this sector. 1. They have been enshrined in sustainable finance regulation and leading standards and initiatives. Resolving challenges with ESG data will be an ongoing process that requires collaboration across policymakers, investment practitioners, ESG data providers and corporates. These issues are compounded by issues with quality, comparability and availability of ESG data, and the lack of standardised disclosures on ESG data by ESG data providers and issuers. Environmental, Social, Governance (ESG) Integration - defined by the Principles for Responsible Investment as the explicit and systematic inclusion of ESG issues in investment analysis and investment decisions. ESG criteria may be used primarily to identify financial risks posed by real or potential ESG impacts. Integrating practices like due diligence for environmental and social risks, improving processes related to stakeholder engagement, and promoting disclosure and transparency, could go a long way in mitigating risks. They provide a common framework for discussion and delineation of responsibilities. This is true both at the regional level, as seen by the inclusion of RBC expectations in various ASEAN Blueprints, but also at the national level, even if specific government actions vary widely across the region. Responsible business conduct in the financial sector - OECD.org It is important to have both an issue-specific perspective but also cross-cutting topics rooted in risk-based due diligence and overall company policies (see OECD, 2020c). It recognises the importance of responsible business and business leadership explicitly and delineates the board roles and responsibilities for the companys long-term sustainable value creation (SEC, 2017a). The OECD Guidelines for Multinational Enterprises are recommendations addressed by governments to multinational enterprises operating in or from adhering countries. The NHRCT has also played a key role when it comes to overseas investments and activities of other enterprises.
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