Beyond their own responsibility to respect human rights, financial institutions can play a critical role in helping to set expectations for virtually every other industry sector.
PARTNERS: individual export credit agencies, development finance institutions and private banks
At Shift, we’ve noticed that when those with the money ask questions, companies pay attention.
“Those with the money” means both private and public sector financial institutions. Private sector financial institutions are institutions like banks, insurers and pension fund managers. These institutions have their own responsibility to respect human rights as private enterprises, according to the Guiding Principles. Public sector financial institutions, like national development finance institutions and export credit agencies, also have to respect human rights in their operations. In addition, states need to pay particular attention to the roles that such institutions can play as part of meeting their own duty to protect human rights (Pillar I of the Guiding Principles).
Beyond their own responsibility to respect human rights, financial institutions can play a critical role in helping to set expectations for virtually every other industry sector. For private sector institutions, their breadth of client relationships means they have connections to a huge amount of business activity going on around the world. And for public sector institutions, their practices can either enhance or undermine states’ duty to protect human rights.
For over two decades, a number of financial institutions have sought to address environmental and social risks through the adoption of risk management approaches. These approaches have been based on the International Finance Corporation’s Performance Standards, which have provided a recognized international reference point.
With the global endorsement of the Guiding Principles in 2011 however, leading financial institutions are now asking whether their existing approaches are sufficient, and how those approaches might need to evolve to meet the expectations of human rights due diligence. In other words, they want to understand how the Guiding Principles can help them manage risks to people arising from the projects and clients that they support. In addition, we increasingly see evidence that better management of risks to people can also help manage business risks to projects and clients, and to financial institutions themselves.
This shift in focus is likely to increase as a result of developments such as the 2016 revision of the OECD “Common Approaches,” which introduce new human rights expectations that apply to export credit agencies in all OECD countries, and the October 2016 agreement (covenant) reached by the Dutch banking sector as part of the Dutch government’s broader initiative to advance sectoral efforts to prevent and address human rights in global value chains.
At Shift, we think that financial institutions play a very important role in driving business respect for human rights. Examples of our work with public and private sector financial institutions include the following:
The kinds of questions that we have explored with these and other financial institutions include: