Human Rights Council

Towards effective remedy in the finance sector…

Towards effective remedy in the finance sector - Forum on Business and Human Rights 2023
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Day 2 (Room XX) - Towards effective remedy in the finance sector - 12th United Nations Forum on Business and Human Rights 27 - 29 November 2023
Background of the session:
  • The United Nations Working Group on Business and Human Rights, along with the Office of the United Nations High Commissioner for Human Rights (OHCHR), have repeatedly addressed the responsibility of the financial sector to respect internationally recognized human rights in line with the UN Guiding Principles on Business and Human Rights (Guiding Principles). They have elaborated on the responsibility of financial institutions to avoid causing or contributing to negative human rights impacts in their own operations and through their business relationships, such as portfolio companies and corporate clients. Where they cause or contribute to adverse impacts, they are expected to provide remedy for or cooperate in their remediation through legitmate processes. Where they are directly linked to harm through their products, services, and business relationships, they should use and build their leverage to promote and enable remedy so that individuals and communities are made whole. In this sense, "financial institution can play a key role to strengthen the broader grievance architecture" by deploying a remedy ecosystem approach.
  • A key part of access to remedy—understood as restoring affected individuals or communities' positions prior to when harm occurred—involves establishing or participating in effective operational-level grievance mechanisms available to individuals and communities who may be adversely impacted. In the financial sector, this involves adopting or participating in effective institution- or investment- grievance mechanisms to ensure third party access to remedy beyond employees and clients.In practice, there is little evidence that financial institutions are making progress towards providing and/or enabling effective remedy for human rights abuses related to their financial products and services. While some financial institutions may require or ask real economy companies (e.g., clients, business partners, investee companies, etc.) to establish grievance mechanisms, they are failing to meet their own responsibility to establish or participate in effective grievance mechanisms themselves.
  • For instance, in the case of commercial banks, BankTrack's Global Human Rights Benchmark (2022), reported that only two among 50 of the largest banks in the world had set up a grievance mechanism, and only 14 expressed a commitment to provide for or support with remediation. Moreover, none of the 50 banks in scope had disclosed concrete efforts to address and/or remedy specific adverse human rights impacts.
  • Despite limited good practice examples, there have been positive developments in support of access to remedy in the sector. One promising example in the commercial banking sector is a case from the Australian National Contact Point for the OECD in which the Australia and New Zealand Banking Group (ANZ) compensated communities affected by a sugar company in Cambodia that was financed by the bank. In the investment sector, the Dutch pension fund agreement provides an avenue for pension funds to promote access to remedy in their portfolio companies when impacts are directly linked and in case of contribution to adverse impacts through their investments.
  • As well as financial institutions, the state plays a key role in the third pillar on access to remedy. In addition to the duty to provide effective state-based mechanisms for those affected by business-related human rights abuses, they must adopt adequate regulations requiring financial institutions to ensure access to remedy in case of harms.
  • Drawing from these examples and community experiences, the goal of the session is to further explore how financial institutions across sub-sectors can implement their responsibilities under the Guiding Principles on access to remedy and meaningfully contribute to the remedy ecosystem.
Brief description of the session:
  • The third pillar of Guiding Principles states that persons affected by adverse human rights impacts should have adequate access to effective remedy mechanisms. In addition to state and non-state mechanisms that should be in place to ensure access to remedy, financial institutions should establish or participate in effective operational-level grievance mechanisms to guarantee effective redress for affected rights-holders. Likewise, financial institutions should provide remedy for or cooperate in their remediation when they cause or contribute to harm to people and/or the environment. Furthermore, where they are directly linked to adverse impacts through their products, services, and business relationships, they have a responsibility to use and build their leverage to promote and enable remedy.
  • In this context, the session will shed light on a key part of the remedy ecosystem—the role of grievance mechanisms and their value to rights-holders, as well as to financial institutions, and the importance of developing effective mechanisms as part of a broader approach toward access to remedy under the Guiding Principles. Panelists will explore examples of remedy in cases involving financial actors, as well as key recommendations for how to improve these mechanisms to better integrate a human rights approach, and other tools financial institutions can use to ensure a robust remedy ecosystem. The role of states and especially regulators of financial actors will also be emphasized to foster states to develop specific requirements for the sector regarding adequate access to remedy. The perspective of rights-holders will also be crucial in understanding the practical obstacles to access to remedy in these contexts and the significant role they can play in the design of these mechanisms and/or in the state frameworks that promote them.
Key objectives of the session:
  • Discuss how grievance mechanisms have evolved in the financial sector, highlighting persistent challenges and opportunities to improve access to remedy for affected individuals and communities;
  • Recommend appropriate actions and tools for financial institutions on how they could address key remedy gaps;
  • Identify best practices regarding access to remedy for the financial sector to adopt;
  • Promote understanding, among stakeholders, of the different types of influence that financial institutions can use to promote respect for human rights and facilitate access to remedy as a means to strengthen their advocacy role;
  • Recommend appropriate actions to states for establishing requirements for adequate access to remedy for financial institutions.
Key discussion questions:
  • What progress has been made in the financial sector since the adoption of the Guiding Principles in terms of access to remedy for affected rights-holders? What gaps still exist today? What are the challenges for affected rights-holders to achieve full reparation and justice when a financial institution is involved or has contributed to harm?
  • What can and should financial institutions do to integrate a human rights approach into their operations and investment/financing cycles including access to remedy?
  • What progress has been made in the development of grievance mechanisms in the financial sector? To what extent have affected rights-holders been involved in the design of these mechanisms? How are judicial mechanisms complimentary to these mechanisms?
  • Considering that the third pillar of the Guiding Principles applies to the financial sector, what type of reparations and/or contribution
  • Ivette Gonzalez
  • Camilo Bermúdez Suarez
  • Giulia Barbos
  • Kees Gootjes
  • Davide Cerrato
  • Pichamon Yeophantong