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Working Group on Business and Human Rights
08 November 2023
Submissions now online (See below)
In its stocktaking exercise of the implementation of the Guiding Principles on Business and Human Rights (UNGPs) over the first decade since their adoption, the Working Group recognized that “financial actors have an unparalleled ability to influence companies and scale up on the implementation of the Guiding Principles”. 1The Working Group also highlighted that this issue was to be a central part of the agenda of implementation of the UNGPs for the next decade, and provided a follow-up report. 2
An issue of particular relevance to the UNGPs is that financial institutions are increasingly including an Environmental, Social, and Governance (ESG) approach (albeit with diverse indicators) in determining their decision-making on investments. For example, in 2016, ESG investing amounted to US$ 22.8 trillion of global assets, and it is expected to more than double to reach US$53 trillion by 2025. 3
There is also an increasing use of data, indexes, ratings, benchmarking and funds labelled as being ESG. Despite this growth, the Working Group has noted that “a key challenge is that most financial actors fail to connect human rights standards and processes with ESG criteria and investment practices because of a prevailing lack of understanding on how human rights issues should be reflected in social criteria, environmental and governance indicators”. 4 There are also indications that, if human rights are considered to any significant extent at all, they are limited to the “S” part of ESG. For the purposes of this report, “ESG approaches” include those as part of sustainable finance, environment and social risk management (ESRM), know your customer due diligence (KYC) and sustainability more generally.
The financial sector, as investors in and funders of businesses across industries, has a very significant role in supporting the implementation of the UNGPs. They can do this, for example:
However, by investing in and supporting businesses which are not acting in conformity with the UNGPs, the financial sector can enable those businesses – across all sectors - to operate in ways that have actual and potential adverse human rights impacts. These impacts are connected to a wide range of financial instruments, across many stages of investment and in all sectors, for example:
A number of judicial and non-judicial mechanisms have shown increasing interest in holding a range of financial institutions to account for the adverse human rights impacts of their actions. For example, National Contact Points (NCPs) operating under the OECD Guidelines for Multinational Enterprises (OECD Guidelines) – of which its human rights elements are expressly based on the UNGPs - have found that investors have acted contrary to the OECD Guidelines. 5 Communications (complaints) to the Working Group have increasingly been directed to investors. 6
This report is undertaken in the context of the previous work of the Working Group and the OHCHR, as well as the other relevant international documents, which clarify that the responsibility to respect human rights applies to all financial institutions, irrespective of their type of financial activity. 7 This responsibility is not limited to areas of financial investment that adopt an ESG approach or offer ESG-related products and services.
The report aims to provide practical guidance to States, businesses, especially financial institutions of all types, civil society and other stakeholders on how to align better ESG approaches with the UNGPs in the context of financial products and services. This will be done in relation to the provisions of the UNGPs and related documents. It will build on the work previously undertaken by the Working Group, the Office of the High Commissioner for Human Rights, OECD and other organisations, 8 including the project on Responsible Business Conduct in the Latin American and Caribbean region. 9
The report will also make connections with the Working Group’s previous and upcoming reports and knowledge products addressing issues such as just transition in the extractive sector, climate change, HRDD, policy coherence, gender dimensions, human rights defenders, state-owned enterprises, access to remedy, and the financial sector in the Latin American and Caribbean region. 10
Against this background, the report will focus on an analysis of ESG financial products and services (e.g., ESG funds, green bonds, sustainability-linked loans), and the associated standards, frameworks, policies, and practices from a human rights perspective, highlighting emerging practices and opportunities for improvement.
In terms of the financial actors covered, the report will include commercial and investment banks, institutional investors, including asset owners, such as pension funds, and asset managers; and funds, including mutual funds, private equity, social investment and venture capital funds. For the purposes of this questionnaire, the term “investors” will be used to include all these financial institutions. The report does not cover multilateral or national development finance institutions, insurance companies or fintech.
The recommendations offered in this report will be targeted to States, financial actors and other relevant stakeholders, and will address the strengths, weaknesses and opportunities that financial regulations, policies and practices offer to move towards a sustainable finance framework centred on a human rights approach. They will build on existing regional and global developments in the field.
The Working Group seeks the written input of all stakeholders, including States, international organisations, national human rights institutions, civil society organisations, research centres, policy makers, academia, lawyers, law firms, arbitrators, trade unions, human rights defenders, and Indigenous Peoples and other rights holders, and industry associations, as well as businesses of all kinds, including public and private financial institutions, institutional investors (asset owners and managers) as shareholders, and all types of investors.
Please feel free to respond to all or selected questions as per expertise, relevance or focus of work.
State duty to protect human rights
Corporate responsibility to respect human rights
Access to remedy
State-based judicial and non-judicial mechanisms
Non-State based mechanisms
Any other comments or suggestions about the forthcoming report are also welcome.
2 A/HRC/47/39/Add.1 and A/HRC/47/39/Add.2.
4 A/HRC/47/39/Add.1, para 46.
5 For example, Australian NCP, EC and IDI vs. Australia and New Zealand Banking Group - OECD Watch, Swiss NCP, Society for Threatened Peoples Switzerland vs. UBS Group - OECD Watch. Other NCPs have mediated complaints against investors, resulting in agreed settlements and strengthening of investor human rights policies and practices, e.g. Dutch NCP: ING Bank, https://www.oecdguidelines.nl/documents/publication/2019/04/19/ncp-final-statement-4-ngos-vs-ing; ND Final statement NCP Specific Instance four trade unions vs APG Asset Management Date: 3 February 2022, at https://www.oecdguidelines.nl/notifications/documents/publication/2022/02/03/fs-4-trade-unions-vs-apg).
6 For example, complaints about investors in relation to dam collapses and bank restrictions.
7 For example, the Working Group's statement to the European Commission: https://www.ohchr.org/sites/default/files/documents/issues/business/workinggroupbusiness/Statement-Financial-Sector-WG-business-12July2023.pdf
8 For example, A/HRC/38/48/Add.1, and OHCHR, ‘Development finance institutions: OHCHR and the right to development’, https://www.ohchr.org/en/development/development-finance-institutions.
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