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October 26, 2023updated 30 Oct 2023 9:58am

Banks failing on human rights, says Banktrack

BankTrack finds the 50 largest banks are largely failing on their human rights record, indicating poor progress on disclosures. Investors are watching.

By Paul Hodgson

A survey by BankTrack finds that the 50 largest banks are largely failing on their human rights record indicating that progress on human rights disclosures is stalling. Investors are watching.
(Photo by Jacob_09 via Shutterstock)
  • BankTrack argues that none of the 50 largest banks in the world fully implement the UN Guiding Principles on Business and Human Rights.
  • A group of 47 investors, with $861bn in assets under management, has issued a statement calling on banks to improve their record.
  • The Corporate Sustainability Due Diligence Directive (CS3D) is expected to be finalised soon despite some resistance to including the financial sector in the law.

BankTrack’s survey finds that 38 out of the 50 banks are implementing less than half of the human rights expectations outlined in the UN Guiding Principles.

All but eight out of 50 banks fell short of reporting on specific human rights impacts.

A group of 47 investors with $861bn in AUM sent a letter to the banks calling on them to improve their human rights record.

None of the 50 largest banks in the world show adequate implementation of the UN’s Guiding Principles on Business and Human Rights (UNGPs), according to research from banking NGO BankTrack’s survey Global Human Rights Benchmark 2022, the fourth such survey since 2014.

Despite this, there have been modest improvements since the previous survey in 2019. The average score last year was five out of 14 compared with four out of 14. Some 33 of the 50 banks increased their final score, with seven banks improving their scores by more than three points, leading to fewer “laggards” and more “front runners”.

The survey criteria examine four aspects of banks’ implementation of the UNGPs: policy commitment, human rights due diligence (HRDD) process, reporting on human rights and approach to access to remedy. But still, even the highest scoring banks meet less than 79% of the criteria, while 100% is the minimum score expected – the UNGPs are a minimum expectation.

Policy commitments are common, and most banks show that they are progressing on integrating HRDD into their processes, but reporting is “stagnating” according to the report and evidence that banks are providing remedies for adverse human rights impacts is “slim”. Banks’ records on responding are even worse. It reports that 12 banks did not respond to any queries raised, while 16 responded but never confirmed their link to the impact or commented on the issues.

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A lack of public response

Only two banks responded to most enquiries made by BankTrack, indicating some action they had taken. However, of the 152 times banks were contacted about violations, “there was no meaningful public response in around three-quarters of cases”.

Some of the front runners are Citi, Mizuho Financial Group and Westpac. Followers include Banco Santander, HSBC and Credit Suisse, while laggards include four banks from China, including the Bank of China, but also, JPMorgan Chase and Goldman Sachs.

“The lack of data from the banks is often attributed to confidentiality issues but that shouldn’t excuse them from at minimum disclosing broad-based anonymised data, and that’s what we are pushing for,” Anita Dorett, director of collective action platform for responsible investment the Investor Alliance for Human Rights, tells Capital Monitor.

“Data and information disclosed on addressing human rights risks should also be informed by customers and communities,” she adds.

Investors concerned about the financial risks of this poor human rights performance are taking note. A group of 47 investors, with $861bn in assets under management (AUM), coordinated by the Investor Alliance for Human Rights, issued a statement calling on the banks to improve their record.

Among other things, the investors are calling on banks to: ensure that HRDD practices are aligned with the UNGPs and that there is “meaningful consultation” with rights holders; publicly report on how impacts have been identified, managed and addressed; improve access to remedy; and respond constructively when civil society raises concerns.

In addition, the EU is in the final stages of negotiations over the Corporate Sustainability Due Diligence Directive – the CS3D – which aims to mandate sustainable and responsible corporate behaviour and to “anchor human rights and environmental considerations in companies’ operations and corporate governance”.

The new rules are also intended to make companies address any adverse impacts resulting from their doing business not just in Europe but globally and across their value chains.

Include the whole value chain

There have, however, been attempts to have CS3D cover only non-financial companies, although the UN Working Group on Business and Human Rights recently called on policymakers to ensure that both non-financial and financial companies were covered by the new law.

Comments Dorett: “The reluctance to fully include the financial sector in CS3D is being led by France with support from Germany. So, the question is who are these states representing; banks and industry associations or the civil society groups that are their true constituents? With two of the largest countries in the EU appearing to oppose full inclusion of the financial sector, that’s not where we want to be.”

The Investor Alliance also put together a statement last November with the Principles for Responsible Investment and EUROSIF, signed by 142 investors with $1.5trn in AUM, saying that responsible investors are already committed to carrying out ongoing due diligence and that the whole financial sector should be held to the same standards by CS3D.

“Investors call on the EU co-legislators to amend the due diligence obligations for financial undertakings to include ongoing assessments which cover the entire value chain,” the statement says.

The European Commission notes that the proposed CS3D will bring benefits for citizens, companies and developing countries, including better access to justice for victims and – and this is the key in this discussion – a harmonised legal framework for companies.

[Read more: Banks have a way to go on human rights: BankTrack]

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