Case study - Amazon

A big part of responsible investment is using the power of being a shareholder to improve the standards and practices of the companies we invest in. These could relate to environmental, social or governance issues.

As a pension company managing the retirement pots of millions of people, our power to make a difference is greater than the power of the individual alone.

Here are some examples of how we use this influence:

What do I need to know?

We like Amazon as an investment, but we acknowledge that it has some risks and challenges.

Although it is a very small part of Amazon's overall business, questions have been raised over the use of Amazon’s facial recognition and analytics software: “Amazon Rekognition”, as well as the sale of this software to other organisations, including the US Government.

It is sold to the government for public protection purposes, however the Amazon board has a responsibility to thoroughly consider the impacts of its use.

Why is this a governance issue?

There are concerns that this software violates privacy and other human rights. These potentially have both reputational and financial implications for Amazon.

The product terms of use received a lot of criticism internally. Amazon employees petitioned the CEO to stop providing the product to governments, because of fears it could lead to discrimination.

Amazon’s management defended the use of the technology, stating that the company is supportive of human rights and has in the past protected and rescued victims of human trafficking, reuniting more than 100 missing children. The company also argued that users must abide by its ‘acceptable use policy’.

What should Amazon do?

We backed a shareholder resolution that Amazon prepare a report on the risks associated with government use of the software as we feel that this needs further consideration from both a social and financial perspective. In June 2020, the company placed a one year moratorium on allowing law enforcement to use the software.

How big is Royal London Asset Management’s shareholding in Amazon?

Royal London Asset Management (RLAM) has a shareholding worth £676 million in Amazon (as at August 25, 2020), equivalent to 0.04 per cent of the company.

What happens next?

RLAM will examine the report once published and decide if Amazon has adequately assessed the risks.

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The Royal London Mutual Insurance Society Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. The firm is on the Financial Services Register, registration number 117672. It provides life assurance and pensions. Registered in England and Wales number 99064. Registered office: 55 Gracechurch Street, London, EC3V 0RL.