Aviva PLC’s (LON:AV.) investment arm is not looking to take part in Deliveroo’s upcoming £8bn IPO over concerns on workers’ rights.
David Cumming, the chief investment officer for equities at Aviva Investors, told the BBC the ESG questions are one of the reasons why they will not buy shares.
READ: Deliveroo highlights gig-economy probes in IPO prospectus
“If they are classed as riders they don’t necessarily get basic rights for minimum wage, sick leave or holidays, and [Deliveroo] states a reclassification of employees as an investment risk to the business,” he said.
"A lot of employers could make a massive difference to workers’ lives if they guaranteed working hours or a living wage, and how companies behave is becoming more important.”
Aviva Investors is among the top funds in the UK, with £365bn assets under management, and one of the most well-regarded in the country for investing and pensions.
On Tuesday, the delivery company warned that it might have to re-draw its business model if it is forced to change the status of its delivery riders, while it has allocated £112mln to cover potential legal costs.
The prospectus, published on Monday, flagged up regulatory probes in Britain, France, Spain, Italy and the Netherlands over how it employs its delivery couriers.
Having to provide riders with holiday and sick pay, minimum wages and other benefits would mean significant changes to the way it operates, the document stated.
Uber recently lost a landmark case in the UK that saw the taxi service provider re-classify 70,000 UK drivers as employees entitling them to legal rights such as a minimum wage, holiday pay and a pension.
Deliveroo said its delivery riders are contractors paid by the number of trips they make and added it has defended this position so far in the UK and elsewhere, though it is under challenge in a number of key markets.
Italy recently ruled against the company and said it should backdate benefits for riders from 2015 up until 2020 but Deliveroo is appealing this judgment. If it loses the costs would be 'material', the tech unicorn added.