you're reading...

The Call to Stop Corporate Human Rights Abuses – What Does It Mean For Financial Companies?

Like all companies, financial companies can and must do more to recognize their frequent role in violating human rights and take action to respect human rights.  At the recent ESCR-Net Peoples’ Forum on Human Rights and Business, held between November 5-7 in Bangkok, close to a 100 civil society and grassroots organizations from around the world deliberated on the direction of the corporate accountability movement, and they reiterated the need to establish strong systems of accountability to combat corporate human rights abuses.

This civil society call is not an isolated message. On June 26th, to commemorate 20 years after the passage of the Vienna Declaration and Programme of Action, civil society organizations released a Civil Society Declaration calling for “international legally binding body” of rules concerning corporations. Furthermore, in Colombia in late August the Corporate Accountability Working Group of the International Network on Economic, Social and Cultural Rights (ESCR-Net) issued a statement calling on the UN Working Group on Human Rights and Business to further enhance international standards to address corporate human rights abuses.

Beginning the process of further elaborating a system of binding standards and development of effective remedies for affected people is not beyond the ambit of the UN Working Group on Human Rights & Business.  In the preamble of the UN Human Rights Council resolution 17/4 that established this Working Group it noted that “efforts to bridge governance gaps at the national, regional and international levels are necessary”, which echoed the same language that was in Council resolution 8/7 passed in 2008 that established the UN ‘Protect, Respect and Remedy’ Framework.

Questions remain though on how all this might apply to finance companies.  Is it reasonable to expect financial companies to be as considerate of human rights as other companies that are more typically associated with human rights impacts, such as mining companies? Is it even possible for financial companies to meaningfully reduce their risk of violating human rights?

In short, it is not only possible, international human rights standards expect financial companies to respect human rights – just like all other companies – and there are concrete actions they are required to undertake.

In April of this year the United Nations Office of the High Commissioner for Human Rights produced a ‘clarification in regard to the applicability of the UN Guiding Principles for Business and Human Rights to minority shareholders of institutional investors’, after a request received from SOMO, a Netherlands-based civil society organization.

OHCHR clarified firstly that “Even though the Guiding Principles do not explicitly reference institutional investors, the application of the Guiding Principles to all enterprises regardless of sector is understood to also comprise enterprises in the financial sector, including institutional investors”.  Next, OHCHR considered the question of whether the provision of finance by lenders implies a business relationship that might require those lenders (like any other business in a ‘business relationship’), pursuant to UN Guiding Principle 13(b), to ‘seek to prevent or mitigate adverse human rights impacts that are directly linked to their operations, products or services by their business relationships, even if they have not contributed to those impacts’. They found that “impacts arising from the activities of the entities in which an investor has a minority shareholding can therefore reasonably be considered as being directly linked to the investors’ operations, products or services”.  Finally, elaborating on the Guiding Principles’ requirement that business use what leverage they have in business situations to ensure respect for human rights, the OHCHR echoed the Guiding Principles by stating that “where an investor…has leverage to prevent and mitigate an adverse impact, it should exercise it”.  Furthermore, “in situations where the minority shareholder finds it lacks leverage, it should consider ways in which it may increase its leverage to prevent and mitigate the human rights risk”.

OHCHR also outlines several ways that investors may be able to actively increase their leverage, including “filing shareholder proposals or entering into dialogue with other shareholders to build alliances for voting on the issue at shareholder meetings. Dialogue with authorities and relevant industry associations could also be considered”. They also briefly mention other strategies such as “document the consequences of the adverse impacts on human rights…[and] consider whether a public statement to clarify its expectations may increase its leverage”.  Finally, “where a minority shareholder lacks leverage, and cannot increase it, it should consider ending the relationship by divesting/selling its shares”.

Overall it is clear that financiers, with even a small financial position in a company that is violating human rights, are required to respect human rights.  The clarifications by OHCHR, and the wider set of human rights due diligence requirements contained in the UN Guiding Principles, are a useful wake up call to financial firms that they cannot afford to pay scant attention to the changing environment of international business and human rights standards.

The UN Guiding Principles are just the beginning of a stronger, more cohesive system of international regulation for corporate misconduct that the corporate accountability movement is striving to achieve over the next generation, and those businesses that choose to show leadership in this area stand to benefit the most from this coming sea change.

It is time financiers start properly coming to terms with their human rights due diligence responsibilities. Doing so would benefit of people that experience the effect of the projects they finance, and would better safeguard their reputations.  In era where public confidence in the integrity of finance sector companies is at record lows, adherence by financiers to human rights responsibilities is one clear and meaningful step in right direction.

Dominic Renfrey is a Programme Officer at the International Network for Economic, Social and Cultural Rights -ESCR-Net.


Comments are closed.

October 2018
« Feb    


part: [ 1 ] [ 2 ] [ 3 ] [ 4 ] [ 5 ] [ 6 ] [ 7 ] [ 8 ] [ 9 ] [ 10 ] [ 11 ] [ 12 ] [ 13 ] [ 14 ] [ 15 ] [ 16 ] [ 17 ] [ 18 ] [ 19 ] [ 20 ] [ 21 ] [ 22 ] [ 23 ] [ 24 ] [ 25 ] [ 26 ] [ 27 ] [ 28 ] [ 29 ] [ 30 ] [ 31 ] [ 32 ] [ 33 ] [ 34 ] [ 35 ] [ 36 ] [ 37 ] [ 38 ] [ 39 ] [ 40 ] [ 41 ] [ 42 ] [ 43 ] [ 44 ] [ 45 ] [ 46 ]