Investors pressure Nike on wages allegedly owed to factory workers

Youth activists who lined the streets of Nairobi last week to call for an end to major fossil fuel projects in Africa did not have much of a say in the agenda of the continent’s first climate summit.

“The African climate summit wasn’t as much of a space for us Africans as we expected,” said Hilda Flavia Nakabuye, a 26-year-old climate activist who founded Uganda’s Fridays for Future movement.

It was “absurd” that the summit’s host Kenyan president William Ruto did not demand more payments from the Global North “for the years of devastation they have caused on our lands”, she added.

If Nakabuye had been in charge, three demands would have figured more prominently: phasing out fossil fuel production, asking western creditors to cancel debts and calling on rich countries to follow through on their repeatedly broken promise to provide more than $100bn a year for climate action in poorer countries.

While activists may have felt sidelined, the urgent tone of their requests was echoed by the dozens of African ministers and institutions who called on western business, finance and lawmakers to do better by Africa.

Over the weekend, world leaders at the G20 summit appeared to heed this call, agreeing to elevate the African Union to a full member of the group and calling for the World Bank to better serve low-income countries.

Please read on for my story on what the business and finance world can learn from the Nairobi summit. But first, Oliver Telling breaks the news of an investor letter to Nike ahead of its general meeting tomorrow, calling on the company to resolve alleged human rights breaches in Asia. (Kenza Bryan)

Nike investors dial up pressure on worker rights

Earlier this year, we reported that unions and non-profit groups were taking Nike to task, alleging that its Asian suppliers had not paid money owed to workers during the Covid-19 pandemic. Now investors have entered the fray.

Investors including $244bn Dutch pension fund PGGM last week sent a letter to Nike demanding that the sportswear giant “fulfil its human rights responsibilities”, calling on the company to ensure workers are paid millions of dollars that they are allegedly owed in wages and severance pay.

The letter, which has not previously been reported, cites a study by investigative non-profit group Worker Rights Consortium that found 1,284 workers were dismissed in 2020 from one Cambodia factory, subcontracted by the Ramatex group, without receiving the remuneration they were entitled to. It also claims that workers at one Thai manufacturer, Hong Seng Knitting, have not been paid wages owed to them during a factory shutdown that year.

Nike did not respond to a request for comment. It previously told WRC that an independent investigation found no evidence of its products being produced at the Cambodia factory in recent years, according to the campaign group. WRC also said it was told by Nike that internal and third-party investigations found no evidence that Hong Seng Knitting forced employees to take unpaid leave.

The escalating pressure on the apparel company underlines ongoing concerns over the income lost by low-paid Asian factory workers during the health crisis, when economies went into lockdown and major western brands cancelled swaths of orders. The investors have not explicitly accused Nike itself of withdrawing orders.

But their campaign also adds to warnings that multinationals should be taking greater responsibility for potential misconduct by their suppliers, amid growing regulatory pressure to monitor their supply chains. Decades after big brands started outsourcing production to Asia to save on labour costs, investors fear a lack of oversight is becoming a significant business risk.

“It’s important that companies are preparing themselves,” said Richard Kooloos, head of social impact at Dutch bank ABN Amro, which signed the letter to Nike. “Companies prepared for future legislation are more robust, more future-proof and more stable for shareholders.”

This year, a non-profit group submitted a complaint against three of Germany’s top carmakers, accusing them of using forced labour in their Chinese supply chains under a new law that penalises companies for failing to address human rights issues involving their suppliers.

As companies face the growing risk of such cases, Kooloos warned that the business world was now “moving from a period of principles to a period of hard law”. He pointed to proposals in upcoming EU legislation that would require companies to ensure those affected by misconduct in their value chains have access to legal remedy.

It is unclear whether the investors will force Nike to rethink its position. ABN Amro declined to reveal the size of its clients’ holdings in Nike and does not intend to restrict investments in the company.

Only five financial groups have at present backed the campaign, according to people close to the efforts. But those involved are urging more to join as the company prepares for its annual general meeting tomorrow.

They are calling on Nike to ensure that the workers affected are collectively paid $2.2mn. The US group reported a profit before tax of $6.2bn for the year to May.

Elsewhere, it has been a good year for the Nike brand: film-goers flocked to see Air, an affectionate depiction of Nike employees in Oregon inventing the Air Jordan sneaker. The campaign on labour rights is yet to significantly dent the company’s image. But activists are hoping that the latest intervention by investors will draw more attention to the workers that Nike depends on, many miles away in Asia. (Oliver Telling with additional reporting by Arjun Neil Alim)

This article has been amended to clarify that investors are calling on Nike to ensure that the workers affected are collectively paid $2.2mn, not $3.2mn as previously stated.

‘The finance gap is staggering: it’s trillions’

Global corporate and financial executives would have done well to pay attention to the goings-on last week in Nairobi, where discussions at the Africa Climate Week gathering revealed some interesting new investment opportunities for the business world.

“The financing gap is staggering, it’s trillions, but you don’t hear about trillions coming into the continent, it’s just trickling in,” Hassatou Diop N’Sele, vice-president of the African Development Bank (AfDB), told Moral Money after dozens of African leaders and US climate envoy John Kerry had set off on planes home. “We feel the urgency but we just don’t have the resources.”

As awareness of this financing gap grows, so too do chances to invest in Africa through public-private partnerships, with multilateral banks, states and philanthropic organisations taking on the biggest risk.

A major aim of the three-day gathering was drawing in capital to fund clean energy and climate adaptation projects on the continent. Attendees pledged a combined $26bn in climate finance deals, including $15mn from the UK to mobilise climate finance from private sources, and €1bn ($1.07bn) from the EU to de-risk private investments into Africa.

Green hydrogen, made using renewable energy, was a particular focus. Germany pledged €60mn for green hydrogen production to make fertiliser, while Hydrogène de France said it would invest $500mn in Kenya’s first green hydrogen power plant.

And much bigger sources of risk capital for clean energy could soon be unlocked. One of the most tantalising is the $100bn in IMF funds (known as special drawing rights) that richer countries had promised in 2021 to redistribute to countries most in need.

The AfDB’s Diop N’Sele told Moral Money that the summit yielded positive discussions with five major holders of this capital, over the possibility of the bank receiving these funds and allocating them itself to projects on the continent. It claims it could leverage each dollar into four dollars of low-cost loans to projects based in Africa.

Another potential source of risk capital, export credit agencies, are under increasing pressure from their national governments to support climate deals, according to Irene Visser, head of strategy and international relations at the Dutch export credit agency Atradius DSB. Last year the agency invested €320mn in de-risking deals on the continent, and has supported start-ups including Spark, an off-grid solar company.

Opportunities for green bond investors, who have had few chances to invest in Africa so far, also appear to be growing. The continent has been behind in sustainable debt issuances, in part because obtaining second-party opinions on the quality of green debt and marketing it to sustainable investors can be costly. But the EU promised at the summit to help shore up Africa’s green bond market by sharing expertise through the Global Green Bond Initiative.

Tanzania’s largest bank CRDB announced a $300mn green raise ahead of the summit, the largest in sub-Saharan Africa. About 40 per cent of this will be bought by the International Finance Corporation, the investment arm of the World Bank.

Barriers to investment remain, in particular the challenge of supporting smaller clean energy projects, which cannot tap bond markets and struggle to attract risk capital from multilateral development banks or export credit agencies, according to Mark Napier, chief executive of the British-government funded agency FSD Africa, which promotes financial sector development.

These challenges mean that some see local capital, not foreign, as the long-term solution. Just $830mn of domestic institutional and banking capital in Africa is invested in climate solutions and clean energy, a fraction of the $1.4tn assets managed by local institutions including pension funds, insurers and sovereign wealth funds, according to FSD Africa and Climate Policy Initiative estimates.

Enthusiasm for government securities, perceived to be low-risk, comes at the expense of investment in the private sector, according to Napier. FSD Africa has worked on creating private debt instruments which channel African insurance money into renewable energy projects. A similar model could be used to funnel institutional money from western sources into a mosaic of small projects. (Kenza Bryan)

Smart reads

• G20 leaders are facing criticism after their weekend summit in India brought a pledge only to a “phasedown” of coal “in line with national circumstances”, with no reference to a phaseout of all fossil fuel usage.

• BlackRock and MFS Investment Management both voted against mining company Glencore’s climate plan earlier this year, new disclosures reveal.