Norway's sovereign wealth fund has announced its support for a shareholder proposal demanding Nike consider binding agreements with workers to improve its handling of human rights issues in high-risk countries.

The $1.7 trillion fund, Nike's ninth-largest shareholder, made the declaration ahead of the sportswear giant's annual shareholders' meeting next Tuesday.

The proposal, put forward by Domini Impact Equity Fund, suggests Nike is lagging behind its peers in this area. Competitors Adidas and Puma have already signed the Pakistan Accord, a legally binding agreement between brands and trade unions.

Nike, currently struggling with declining sales, faces pressure from investors on multiple fronts. Shareholders are set to vote on several proposals concerning the company's supply chain policies and climate targets.

The Norwegian fund, which owns a 0.92 per cent stake in Nike worth around $1.05 billion, stated: "The board should account for material sustainability risks facing the company, and the broader environmental and social consequences of its operations and products."

In addition to supporting the workers' rights proposal, the fund will vote against Nike executives' compensation for the fifth consecutive year, citing excessive pay, particularly among US companies.

However, the fund will not back a separate proposal by Tulipshare asking Nike to assess the effectiveness of its supply chain policies in ensuring workers' rights.

On the sustainability front, the Norwegian fund will support a proposal demanding Nike reassess its strategy after missing self-imposed climate targets for 2015-2020. Trium Capital, which put forward this proposal, expressed disappointment in Nike's "track record and lack of perseverance".

Last year, Domini was among more than 60 investors who urged Nike to address $2.2 million in allegedly unpaid wages to over 4,000 garment workers at suppliers in Cambodia and Thailand. The workers reportedly lost wages due to COVID-19 factory shutdowns, though Nike has denied these allegations.

Nike has recommended investors vote against the Domini proposal, setting the stage for a contentious shareholders' meeting next week.

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