By Mike Head, Senior Adviser to The Justice Company
Ask yourself: what you picture when you hear "human rights"?
The Universal Declaration of Human Rights, adopted in 1948 in the wake of the Second World War, began with the most basic ones: the right to life, and freedom from torture and slavery. Today the phrase covers so much more. This article is about the core: the right not to be killed, tortured, displaced, or forced to live under occupation or repression.
In investing, that core has been squeezed out. When the OECD reviewed more than 2,000 metrics across eight leading ESG rating products in 2025, it found gaps in what they cover. For some, human rights did not feature at all.¹
A short history, from Quaker exclusions to net zero
Ethical investing in the UK has a traceable starting point. Friends Provident's Stewardship fund, launched in 1984, was built on Quaker-rooted exclusions: alcohol, tobacco, gambling, arms and companies that supported apartheid-era South Africa.² Follow the criteria of that fund through the Body Shop era and on to today, and you see a distinct movement away from people and towards the environment.
The reason is that ethics is messy. A screen that asks whether a company is complicit in harm to people requires judgement, and judgement narrows the investable universe. Asset managers want as wide a field to invest in as possible.
A licence to hold
ESG began as a way of screening companies out. Today, it is more often used to say “yes”, which makes it more of an inclusion approach than an exclusion one: a desire to have as many companies on the list as possible, rather than the right ones.
The Sustainable Finance Disclosure Regulation (SFDR) offers an example. Funds that had assumed they would qualify as Article 9 were reclassified down to Article 8, and Morningstar counted more than 350 such funds, with over €200 billion in assets³ between July 2022 and March 2023. That fixed the labelling problem, but did nothing for the substance. The funds were simply resorted into a bucket that remains permissive on the S.
The money follows the label
The numbers show where the money and the attention go. Morningstar's third-quarter 2025 review of SFDR Article 8 and 9 funds⁴ sorted funds by the ESG terms in their names. Those with environmental terms held €185 billion in assets, against €22 billion for those with social terms. That is about 8.4 times as much.
Sustainable investing has become shorthand for climate. Carbon risk and resilience, temperature alignment, transition plans, net zero. Of course, these are important issues, but ESG was never meant to read so narrowly.
It is fair to ask whether the sustainability sticker has become more important than alignment with human rights, when a fund can call itself sustainable and still hold the companies that make the weapons. The Justice Company reviewed 100 of the top Article 8 UCITS equity ETFs and found 59 hold conventional arms makers such as Rheinmetall and BAE Systems.⁵ Their exclusions reach only controversial weapons (anti-personnel mines, cluster munitions, chemical weapons and biological weapons) and place no restriction on producers of conventional military equipment.
Why climate is easier
Climate has a common measure. It has carbon data, ocean acidification figures and temperature records. Human rights in conflict has no equivalent. How many people have been displaced in Sudan? How many journalists have been killed? How many hospitals have been destroyed? The answers are expensive to establish and hard to quantify, so much of the industry does not try.
Most analysts who look at the S in ESG look at supply chains, in garments and minerals for example, and leave conflict alone, because conflict is live and messy. Human rights has been deprioritised because it is difficult, time-consuming and expensive to track, validate and measure.
A lesson from animal welfare funds
Animal welfare shows how this plays out. Early animal welfare exclusion funds had strict criteria and it didn't hurt performance, but managers found the zero-tolerance policy became an operational nightmare as firms globalised and supply chains became more complex. This led to a drift toward “avoid if possible” thresholds instead of hard lines.
Human rights is following the same pattern, with precision giving way to vagueness once precision becomes inconvenient. Conventional weapons manufacturers are not automatically excluded from portfolios carrying an Article 8 designation. But many of those investing in an ESG fund would not reasonably expect to hold strategic defence of any kind.
The consumer disconnect
Investors want their solar panels and electric vehicles but don't want to be confronted with the reality of solar panels being made with slave labour or their EVs being made with conflict minerals being dug out of the ground by children in the Democratic Republic of Congo.⁶
Managers have not been sufficiently proud of where they invest, or brave enough to tell that story. It is easier to talk about carbon neutrality.
What would fix it
What can force human rights back to an equal footing with climate in the design of Article 8 and Article 9 funds? A practical starting point is conflict exposure reporting. Conflict-affected and high-risk areas (CAHRAs) already have a settled definition in the OECD's due diligence guidance, which describes them as places with armed conflict, widespread violence or other risks of harm to people.⁷ Classifying holdings against that definition would let a manager disclose what percentage of a portfolio is exposed to such areas. This is already used internally by churches and pension funds but not publicly disclosed by asset managers. Public disclosure would be rules-based and put evidence ahead of assumption. One figure per fund would turn a vague promise into something an investor can check.
Do you know what your pension holds? Human rights are intended to stop the worst things people do to one another. If investing is going to claim it, it should start there.
²https://www.fundecomarket.co.uk/help/40-years-of-uk-retail-ethical-investment/