Aberdeen Standard Investments, one of the UK’s biggest fund management groups, will not invest in the stock market flotation of Deliveroo next month, becoming the latest large scale investor to shun the food delivery company because of concerns over workers’ rights.
The Edinburgh-headquartered asset manager, which oversees £535bn, said it is concerned about the sustainability of Deliveroo’s business model “including but not limited to its employment practices”.
Riders who work for Deliveroo are classified as self-employed contractors, meaning they miss out on basic employment rights such as the minimum wage, holiday and sick pay.
The asset manager also cited “broader governance of the business” as a reason not to invest in the Amazon-backed company.
“As long-term investors, we’re looking to invest in businesses that aren’t just profitable, but are sustainable – employee rights and employee engagement are an important part of that,” said Andrew Millington, head of UK equities at Aberdeen Standard Investments.
“Our clients’ expectations of how we incorporate ESG into our decision making have changed hugely over the last decade and so we feel our clients are supportive of our approach.”
Deliveroo announced on 22 March that it had priced its IPO at between £3.90 and £4.60 a share, which would value the business between £7.6bn and £8.8bn when it lists in April.
It would make an IPO by the company, which has never posted a profit since it was founded by Will Shu in 2013, the biggest on the London Stock Exchange since that of mining giant Glencore in May 2011.
Steve Clayton, head of equity funds at Hargreaves Lansdown, told Financial News he won’t be investing in the IPO.
“The ESG issues are not good,” he said.
“Too many digital businesses push risk down to the workforce. For some riders, students perhaps, the Deliveroo model of working flexibly might be fine, but for others it offers a lack of basic security of employment and income.”
The comments from Aberdeen Standard Investments and Hargreaves Lansdown come after Aviva Investors, the £355bn UK fund manager, raised concerned about working practices at Deliveroo.
Speaking on Radio 4’s Today programme on 24 March, chief investment officer for equities David Cumming said a combination of “investment risk and social issues that affect our judgment whether the shares are a buy or not”.
He said employment practices was one reason why it would steer clear of the IPO, adding there was an investment risk if legislation changed which meant Deliveroo’s riders were reclassified as workers.
Deliveroo was contacted for comment.
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