Banking Lags on Human Rights - Invest with Values

July 08, 2016

Banking Lags on Human Rights
by Robert Kropp

A report by the NGO BankTrack reveals that most major global banks are failing to implement the UN Guiding Principles on Business and Human Rights in their financing.

SocialFunds.com — A recent report published by a group of nongovernmental organizations (NGOs) revealed that while major global banks have made strides in shying away from financing coal mining, their funding of extreme oil (including Arctic drilling, tar sands, and ultra-deep offshore drilling) and liquefied natural gas (LNG) export runs counter to the aims established at COP21.

The report also concluded that none of the banks analyzed “even have comprehensive human rights policies and report on human rights due diligence.”

The Netherlands-based NGO BankTrack was one of the contributors to the report; it has since produced another report, entitled Banking with Principles?, which focuses exclusively on the human rights performance of 45 major global banks. The report is a followup to one produced by BankTrack in 2014.

Unfortunately, while there there may have been signs of slight improvement at some banks since BankTrack’s 2014 report—of the 30 banks included in both studies, 15 of them did improve their scores—the industry as a whole is, quite simply, failing to live up to its responsibilities regarding human rights. BankTrack benchmarked the banks according to the four primary categories included in the United Nations’ Guiding Principles on Business and Human Rights, and graded the 45 banks on a scale of zero to 12. The four categories are policies, due diligence commitments, reporting and access to remedy.

The highest grade of any bank was only eight, which means that for the second time not a single bank was accorded the status of True Leaders by BankTrack. In fact, the report points out, 24 banks—more than half of those assessed—were rated as Laggards, “showing little or no evidence that they are actively assessing the potential human rights impacts of their finance.” Seven of the ten North American banks included in the report fell into this group.

“The report also identifies three requirements from the UN Guiding Principles that are not being met by any of the banks assessed,” BankTrack stated. “Firstly, no banks showed clearly how they include meaningful consultation with potentially affected people in their human rights due diligence. Secondly, bank reporting on specific human rights impacts was limited and insufficient to evaluate how banks had responded. Thirdly, no banks have yet met the requirement to establish or participate in effective complaint mechanisms.”

“We are particularly concerned that, after five years, banks are apparently ignoring important Principles,” the report concluded. An appendix to the report informs that the Organization for Economic Co-operation and Development (OECD) “is engaged in a multi-stakeholder process to develop guidance on due diligence to ensure ‘responsible business conduct in the financial sector’.”

“The Guiding Principles are a standard of business conduct that is expected by UN member states,” report author Ryan Brightwell said. “Yet we have to conclude that, five years on from their adoption, the level of implementation in the banking sector remains poor.”

“It is particularly worrying that banks are apparently ignoring important principles entirely, especially those which require them to ensure that people potentially affected by their finance have their voices heard,” he continued. “Such alarming gaps call into question whether the essentially self-regulatory approach of the UN Guiding Principles is working.”

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