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        Remarks by Siobhán McInerney-Lankford
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Extract

The nexus of human rights (HR) and finance has gained increased attention in recent years, particularly since the UN Human Rights Council's adoption of the UN Guiding Principles on Business and Human Rights in 2011. This article argues that human rights can and should be integrated in financing (“an integrative approach”), and proposes an approach based on five elements: (1) defining human rights considerations in explicit terms; (2) explaining the challenge we are confronted with in attempting to integrate human rights into financing; (3) articulating a justification for such integration; (4) identifying the nature and source of the applicable norms and human rights obligation to be integrated; and (5) outlining an applicable methodology and a practical operational approach.

Footnotes

This panel was convened at 11:00 a.m., Thursday, April 5, 2018, by its moderators, Daniel Bradlow of the University of Pretoria and David Kinley of the University of Sydney, who introduced the panelists: Whitney Debevoise of Arnold and Porter LLP; Siobhán McInerney-Lankford of the World Bank Group; Anita Ramasastry of the University of Washington School of Law; and Nicolas Veron of the Peterson Institute for International Economics.

The nexus of human rights (HR) and finance has gained increased attention in recent years, particularly since the UN Human Rights Council's adoption of the UN Guiding Principles on Business and Human Rights in 2011. This article argues that human rights can and should be integrated in financing (“an integrative approach”), and proposes an approach based on five elements: (1) defining human rights considerations in explicit terms; (2) explaining the challenge we are confronted with in attempting to integrate human rights into financing; (3) articulating a justification for such integration; (4) identifying the nature and source of the applicable norms and human rights obligation to be integrated; and (5) outlining an applicable methodology and a practical operational approach.

Defining “Human Rights Considerations”

In answering the question of whether human rights considerations can or should be integrated into financing, a threshold issue is to define “human rights considerations” and to be clear about whether such a term should be understood to mean any social issue or impact and to include implicit consideration of HR? It is worth noting that many in development finance contexts would contend that environmental and social policies of international financial institutions (IFIs) more than cover human rights considerations, and would charge that there is not any need for an explicit approach. It is submitted here, however that adopting an expansive definition of human rights and including in that definition “implicit” human rights considerations or human rights analogues, risks overlooking the essence of human rights as norms underpinned by international law obligations and an opportunity to do better from a human rights perspective. In particular, the implicit or indirect integration of human rights carries with it the risk of rhetorical repackaging and a resultant lack of real accountability

Explaining the Challenge

If one adopts an explicit approach to human rights considerations in finance, then an appraisal of the current state of international law and policy is defined by the near complete absence of human rights law and norms in legal and policy frameworks governing international finance. The overall international legal and policy landscape is also defined by deep disconnects, which in turn can be argued to reflect the fragmentation of public international law and result in a lack of international policy coherence or “joined-up thinking.” A key element of an effective integrative approach is to understand the challenge being faced, which can be characterized by how to connect human rights law norms with the economic analysis and regulation that defines international finance. Put differently, the challenge can be understood as how to connect, in explicit operational terms, what is at its heart a normative framework with what are essentially instrumental frameworks.

Articulating a Justification

Before asking how human rights can or should be incorporated explicitly into finance, it is important to ask why such an incorporation should take place. It is essential to articulate a justification for such an integration. A range of justifications can be articulated but one simple yet powerful justification is that human rights form part of the applicable law, whether that is assessed on a domestic or international sphere. The simple adage that “it is the law” recalls a focus on existing international law obligations of states that apply in all domestic and international contexts, including finance. States are the members of IFIs and have human rights obligations in those contexts, as in any others, whether they act as borrowers or lenders/donors in those contexts. Another compelling justification is grounded in the need to systematically institute a principle of “do no harm” vis-à-vis human rights in finance: human rights law provides one means to do that, through its binding legal standards and related tools and indicators.

Identifying the Nature and Sources of Human Rights Law Obligations

The exhortation to focus on the governing law requires an understanding of the applicable law, including identifying the sources of that applicable law. Such an inquiry also requires making important distinctions between binding law and soft law, between treaties and voluntary initiatives, and between obligations on the one hand and responsibilities on the other. Notwithstanding the importance of the distinctions, these two bodies are connected and potentially mutually reinforcing (see state-business nexus in the UN Guiding Principles on Business and Human Rights, especially Principles 4–6).

Soft Law

A number of influential soft law initiatives exist which are varied in their approaches and in their sectoral focus. Each of the examples in the following non-exhaustive list has direct relevance to the area of human rights and finance: United Nations Environment Programme Finance Initiative (1992); the Global Reporting Initiative (1997); UN Global Compact (2000); OECD Guidelines for Multinational Enterprises (2000); the Equator Principles (2003); the UN Guiding Principles on Business and Human Rights (2011); the International Finance Corporation Sustainability Framework (2011); the EU Commission Communications on corporate social responsibility and on non-financial reporting requirements (2011–2015); and the Thun Group of Banks Discussion Paper (2017).

Hard Law

Within hard law, either domestic or international law may be sources of applicable human rights norms.

(1) Domestic laws of relevance may be those of host states or states of incorporation and include national laws governing labor, non-discrimination, and occupational health and safety, such as the 2015 French bill. Also relevant may be national and international regulations related to social and environmental reporting

(2) Applicable international law includes the range of universal human rights treaties adopted under the aegis of the United Nations. These include treaties on economic and social rights (International Covenant on Economic, Social and Cultural Rights, 1966), civil and political rights (International Covenant on Civil and Political Rights, 1966)), and on the rights of women (Convention on the Elimination of all Forms of Discrimination Against Women, 1979), children (Convention on the Rights of the Child, 1990), and persons with disabilities (Convention on the Rights of Persons with Disabilities, 2006), among others. In addition to such universal instruments, a number of regional human rights instruments exist such as the European Convention on Human Rights (1950), the Inter-American Convention on Human Rights (1969), the African Charter of Human and Peoples Rights (1981), and the Charter of Fundamental Rights of the EU (2000). Such international human rights treaties establish, for states parties, the legally binding obligations to respect, protect, and fulfill human rights. A unique feature of the obligations flowing from international human rights law treaties is their operation and applicability both horizontally and vertically. In addition to treaty law, customary international law constitutes another potential source of binding human rights norms, including peremptory norms1 of jus cogens and obligations erga omnes, from which no derogation is permitted.

Having argued for a greater focus on human rights law obligations, it is worth exploring in greater depth what those might be, particularly in the context of arguments in favor of integrating human rights into finance. That is, there is a need to be very specific and granular about the particular obligations to be integrated and to what specific element and stage of finance. Hortatory general calls for the integration of human rights into development frequently fall foul of critiques for the lack of concrete specificity. At the same time, the legal typology of human rights law naturally lends itself to that clarity and specificity, even if it is underused. In particular, human rights law establishes obligations to respect, protect, and fulfill, clarifying the particular expectation of conduct on the part of the duty bearer, usually the state.

This article argues that the most compelling argument for the integration of human rights into finance and the basis for the value added of human rights to finance emerges in respect of hard law. In this, the primary, though not exclusive, focus should remain on human rights as legally binding norms since this accountability is the distinguishing element of human rights and the essence of the value added of human rights. Thus, the key to effectively connecting human rights norms with financial regulation is to anchor the operational and practical analysis in the universally applicable human rights obligations and to go a step further, and identify the particular type of obligation (to respect, protect, or fulfill) and explain the concrete implications of the integration of that precise obligation.

This element of the approach calls for a focus on identifying a particular right and extrapolating its nature and application to a particular stage or decision of financing—such as the right to due process, the right to an adequate standard of living, the right to equality or non-discrimination, access to information, the right to privacy, and effective remedy (a substantive mapping is needed). Relatedly there is a need to identify the specific nature of the applicable obligation derived from human rights law (respect, protect, fulfill). In the context of private commercial bank and financiers, the relevant binding human rights law obligation will more often than not be the state obligation to protect, which is the state obligation to protect groups and individuals from human rights violations occurring as a result of the acts or omissions of third parties.

Outlining a Methodology and Practical Operational Approach

Having argued why, how, and what is implicated in an approach that argues in favor of the integration of human rights into financing, some attention should be devoted to how such integration should be carried out. What are the relevant metrics to use to first establish how human rights are affected by financing at different stages and levels, and second, outlining the practical implications of integrating human rights into finance, with metrics and indicators being an indispensable part of this element?

There is a need to demonstrate causality between financial policy or financing decisions and human rights impacts, or conversely, how, in the practical terms of an individual financial policy application or financing decision, to integrate human considerations. This is connected to a broader criticism which is that the HR community needs to pay more attention to demonstrating the human impact of financial regulation, whether acts or omissions, in both positive and negative terms. Arguing the methodological and empirical case for human rights in this context requires a solid source of data and a reliable framework of human rights indicators. More generally, the use of data and more instrumental approaches, while necessary from a methodological perspective to the enterprise being advocated here, may also help support more broadly applicable arguments about the value added of human rights for the financial sector, whether in terms of sustainability, or risk management. In addition, there is the simple fact that a robust approach to methodology may also help to show that integrating human rights considerations is feasible within financial frameworks and procedures

There are a host of practical considerations to include in any integrative approach—these include cost and time but also the political ramifications of such integration. Even the best intended approaches to integrating human rights into financing can have unintended consequences and bring with them certain risks. For instance, they may be used to impose human rights conditionality, which may lie beyond certain IFI mandates, particularly those with no human rights mandate and no human rights monitoring and enforcement role. This begs the question of which entities can and should be charged with the role of implementing such an integrative approach? Not all have the mandate or capacity to do so and not all may be willing to do so for these and related institutional and political reasons. For instance, if in pursuit of an integrative approach, financial institutions were to employ human rights due diligence (HRDD)2 or undertake a human rights impact assessment (HRIA), how would such institutions ensure the consistent and coherent application of such HRDD or HRIA and what would be the consequences of negative conclusions from any such analysis? There would be considerable work needed to develop the requisite methodology and guidance to institute such a practice and such guidance would need to be adapted by institutions and perhaps even by regions and sectors. In light of the primary legal accountability of human rights obligations lying with states, it would be an additional practical and institutional challenge to appropriately assign the responsibility and effectively ground accountability for such practical and operational elements of an integrative approach within financial institutions.

Conclusion

This article has argued that there is a need for a new approach to address the human rights dimension of finance and has further argued that such a new approach can and should integrate human rights explicitly and systematically into financing policy and decisions. It has proposed five basic elements to ground such a new approach. In addition to extrapolating the nature of those considerations and anchoring their integration in a justification based on the binding nature of human rights norms (both international and domestic), the approach would start from, and be defined by the fact that human rights obligations apply universally, including across financial sector and regulators. Relatedly the approach would underscore the importance of international policy coherence and joined-up thinking in the context of finance, both domestic and finance. The integrative approach advocated for here would emphasize the value added of human rights law by focusing on the nature of the human rights obligations of states, identifying for particular decisions or policies, which rights were involved and specifying the correlative obligations to respect, protect, and fulfill. A strength of the approach outlined here would be its emphasis on practical ramifications as well as its underscoring of operational and institutional implications.

1 The following have been identified as among these: the prohibition on piracy, genocide, and crimes against humanity; the prohibition of racial non-discrimination; and the prohibition on slavery.

2 HRDD is understood here to mean an ongoing risk management process that a reasonable and prudent company needs to follow in order to identify, prevent, mitigate and account for how it addresses its adverse human rights impacts.