The United Nations has called for banks to engage with grievance mechanisms so that stakeholders can hold them to account for the human rights impacts of financing decisions.
The call comes in a detailed interpretive advice note from the UN Office of the High Commissioner for Human Rights (OHCHR) that could become a key document as the debate about banks’ responsibilities evolves.
The new UN guidance is in response to a request in March by campaign group BankTrack for advice on how the UN Guiding Principles on Business and Human Rights (UNGPs) should be applied to banks.
A bank, the UN says in the new note, “cannot meet its responsibility to respect human rights if it fails to provide for or cooperate in remediation of harms which it has caused or construed to”. Thus it recommends the use of an ‘operational-level grievance mechanism’, or OLGM.
OLGMs, which are provided for in the UN Guiding Principles, “have to date been little discussed with respect to the finance sector, or for banks specifically”. Indeed, BankTrack research in 2016 found that no bank had met the requirement under the UNGPs to establish or participate in effective complaint mechanisms.
They could potentially take a range of forms, the UN suggests, depending on the type of bank, the needs of its stakeholders and its “human rights risk picture”. But further discussion both within the sector and with stakeholders is necessary, the guidance adds. It notes there’s an ongoing discussion about the issue in the context of the Dutch Banking Sector Agreement.
The 16-page document, the OHCHR’s most detailed guidance to the banking sector to date, comes ahead of a meeting on June 19 of the Thun Group, the informal grouping of banks that engage in human rights discussions.BankTrack had sought clarification from the UN after the Thun Group published a paper that was criticised for suggesting banks would not generally be considered, under the UNGPs, to be causing or contributing to adverse human rights impacts arising from their clients’ operations. At the time John Ruggie, the Harvard professor behind the Principles, said he was “deeply troubled” by the paper.
RI understands that Ruggie and other senior figures will attend the Thun group meeting and that the group has agreed to publish a report of the meeting.
But the new advice reaffirms that banks can contribute to adverse human rights impacts through their finance, for example if its actions and decisions influence a client in such a way as to make an impact more likely. In such circumstances, the bank may be responsible for remediating the human rights impact together with its client.
A bank may also be directly linked to a human rights impact through its finance, without contributing to it, in which case it would not be responsible for remedying the impact, although it may take a role in doing so. It also makes clear that neither case involves a shifting of responsibility from the client onto the bank.
The advice is “intended to provide clarification on aspects of the UNGPs in relation to the particular questions posed by BankTrack,” said Peggy Hicks, the Director of Thematic Engagement at the OHCHR in a cover letter to BankTrack. Hicks, formerly with the Human Rights Watch NGO, said it may also be a “resource” for other stakeholders as the implement the UNGPs.
The new advice, BankTrack says “should be read carefully by anyone within the banking sector with responsibility for sustainability and human rights”.