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What can human rights contribute to the design of a sustainable financial system?

Spurred by the accelerated pace of globalization, and the rise and dominance of multinational and state-owned enterprises over the last few decades, scholars around the world researched many key industrial sectors and exposed the human rights consequences of our multi-faceted economic life. Today, we know the human rights consequences of resource extraction, as well as production, distribution, consumption and disposal of goods.  We know how cross-border investments and trade facilitate those economic activities, and the human rights consequences to home and host countries and their citizens. We know the role that finance plays in investments and trade and how finance can both violate people’s human rights and help them realize their human rights.  Several past financial crises, especially the most recent one, invited much scrutiny on the failure of the global financial system to pay attention to human rights consequences of its excesses. So it is none too soon that the United Nations’ Environmental Programme’s Inquiry into the Design of a Sustainable Financial System (the Inquiry) is asking about the role that human rights play in the design of a sustainable financial system.

The purpose of the Inquiry is to support the accelerated transition to a green economy by better aligning the financial system to the resilience and the long-term success of the real economy.  Inaugurated in January 2014, the Inquiry aims to aid such transition by identifying best practice, and exploring financial market policy and regulatory innovations that would support the development of a green financial system. In the process, the Inquiry is recognizing the lack of policy alignment between finance and investment, and sustainable development, and asking whether it would be useful to align financial policies and regulations with human rights norms.

The Institute for Human Rights and Business (IHRB), a global think tank, is pleased to partner with the Inquiry to produce a technical paper that will examine the merits of a rights-based approach to financial and monetary policy, and financial regulations and standards. To kick off the process, we organized an initial discussion on the topic in Geneva in December 2014 with a number of experts.  The outcome paper from that meeting can be accessed here. In March, we will meet in London with a wider group of experts to further the discussion.    Another consultation meeting is expected in Washington, DC on April 13.”  The IHRB-Inquiry paper will be finalized by the summer.  The Inquiry will produce a final options report by October 2015.

Much of the existing, limited research so far focuses on impacts of finance on human rights – mostly about the negative human rights outcomes on individuals, households and communities from specific monetary or financial policy, products or practices, or from the operations of corporate clients using financial products.  But the existing research just scratches the surface on exploring linkages of impacts of finance on human rights and human rights on finance.   The IHRB-Inquiry paper will seek to highlight important areas of further research to begin to explore those linkages further.  In order to present a fuller picture, we will need additional analysis on how human rights can influence financial sector rulemaking, financial products and practices, and the governance and accountability mechanisms of financial institutions.

IHRB will post relevant consultation materials on the IHRB website and welcomes any feedback and ideas from experts and stakeholders who would like to participate in shaping this emerging agenda.  In particular, we would welcome any relevant research that can be introduced into the paper, as well as examples of country or thematic innovation where human rights influenced financial sector rulemaking, development of financial products or mechanisms, or governance and accountability mechanisms of financial institutions.

The IHRB team looks forward to hearing from you and engaging with you over the next few months.

Motoko Aizawa is the Managing Director USA at the IHRB, Margaret Wachenfeld, Director of Legal Affair and Research at IHRB and Mary Dowell-Jones, a partner to IHRB based at the University of New South Wales. Click here to direct comments and suggestions to them.

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