Many responsible investors believe in the importance of good working conditions – not just for the employees of the company in which they invest, but also for those employed in the supply chain. We engaged in dialogue with several companies on this topic in 2016. One of them was La Doria, an Italian supplier of tomato and other food products. La Doria employs around 750 permanent staff and 1,500 seasonal workers, and has been accused in recent years of practices tantamount to ‘modern slavery’. The accusations relate primarily to tomato-pickers from Africa and Eastern Europe, who were said to be working under very poor conditions for La Doria agricultural suppliers in southern Italy.
To obtain an accurate picture, KCM not only contacted La Doria, but also a number of its clients, namely supermarkets which claim that they do not tolerate poor working conditions at their suppliers. It transpired from these discussions that there is indeed evidence of poor working conditions in the Italian agricultural sector but that La Doria is not directly involved. In fact, according to the supermarkets, La Doria is actually one of the most sustainable operators in the market, for example encouraging its suppliers to harvest mechanically rather than by hand where possible. In view of these practices, the risk of involvement in modern slavery is very small.
Moreover, all suppliers used by La Doria are bound by the company’s ethical code. La Doria’s own seasonal workers are given employment contracts where possible, are paid at least the minimum wage and are asked to work as little overtime as possible. La Doria has stated that it wishes to be as transparent as it can about its production conditions, and accordingly announced in 2016 that it was commissioning an independent third party to carry out further screening of its suppliers. Once the findings become available, we will discuss them with the company if necessary.
This approach works, as illustrated for example by our successful dialogue in recent years with the American high-yield manager Neuberger Berman. There were two important topics for engagement, the first of which concerned an investment in a controversial arms company. KCM noted that the Neuberger Berman High Yield Bond Fund had a stake in Aecom, a company that is excluded from the KCM investment universe due to its involvement in the production of nuclear weapons.
Neuberger was amenable to dialogue and, following a number of discussions and meetings, decided to sell this investment. It also emerged from these discussions that, while Neuberger takes ESG criteria into account in its decision-making process, this applied principally for equities and debt instruments issued in emerging markets, not for high-yield investments. KCM successfully persuaded Neuberger to integrate ECG criteria into its decision-making process for high-yield investments as well.
See our annual CSR reports for more examples of engagement results