As the UN Guiding Principles on Business and Human Rights continue to be operationalized in a variety of industry sectors, experts are beginning to take a closer look at exactly how businesses actually accomplish this goal. In the banking sector, establishing human rights policies and embedding those policies into banking operations is a significant undertaking. As a starting point, banks and other financial institutions are beginning to establish human rights statements, setting forth those institutions’ human rights policies and describing the manner in which those policies are operationalized within the enterprises. But is this enough?
Recently, we at Human Analytics undertook a review of the human rights statements at 5 large U.S. banks – Citi, Goldman Sachs, Bank of America, J.P. Morgan Chase and Morgan Stanley. What we found was that overall, each of these institutions had publicly available human rights statements in place and to varying degrees, had fulfilled their obligations to make a policy commitment with respect to human rights principles set forth in the UN Guiding Principles. For those unfamiliar with the UN Guiding Principles, of relevance to this discussion is Principle 16, which establishes 5 factors necessary to fulfill their policy commitments:
- The statement is approved at the senior level of the institution;
- The statement is informed by internal and/or external expertise;
- The statement stipulates the human rights expectations of personnel, partners, suppliers and others engaged with the institution;
- The statement is publicly available;
- The statement is reflected in the policies and procedures throughout the business enterprise.
Though conceptually simple, determining whether any institution has adequately addressed its responsibilities as laid out in Principle 16 is a bit more complex.
First, none of the human rights statements reviewed explicitly stated that they had been approved at the highest level of the organization but we made the assumption that because the statements were published on the institutions websites, senior management approved of them. However, implicit in the publication of the policies is that they are publicly available.
Second, none of the statements suggest that they were developed with the necessary expertise to make the policy statements meaningful in any significant way. Citi describes how the institution operationalizes its policy commitments, suggesting that it has developed the necessary expertise to carry out its policy commitments. However, the other banks made no mention of this. Below is a table that reflects how each of the banks fulfilled their policy commitments to respect human rights.
But perhaps the most significant omission from all of the human rights statements was any reference to business products that impact human rights. The focus of each of the policies was on the human rights implications arising out of bank lending and capital financing activities but there was no mention about financial products that are the direct cause of human right violations, regardless of how those products were used by the banks’ clients. Thus, there was no reference to the human rights implications of complex products, such as derivatives, investment banking activities that, by their very nature could potentially lead to profound economic and human impacts in communities that were affected by mergers or acquisitions or creative securitization of other products such as mortgage backed securities. While a detailed analysis of the human rights implications of all of an institutions’ products and services is appropriate in a human rights policy statement, any mention of broad service areas (investment banking, derivatives, securities underwriting, etc.) is a broad omission by these financial institutions.
As development of human rights policies and procedures evolves, financial sector companies must own up to the fact that respecting human rights is not just about following the money as it is used by bank customers large and small but more fundamentally, how these institutions utilize capital in all aspects of global finance. If this is not done, the notion of respecting human rights is largely meaningless.