Change Agents: Financial Institutions
Introduction to the series
Increasingly, investors are becoming interested in understanding to what extent companies are respecting human rights, and whether their efforts are likely to improve the lives of affected people. A good place to start is by reading a company’s human rights disclosure. But company reports are often hard to analyze. On the surface, many companies will seem to be doing the right thing. But, how can investors tell whether what they are reading is meaningful and in line with what the UN Guiding Principles expect? This collection of resources was designed by Shift to help investors apply a people-centered approach to gain deeper insights from company disclosure.
In each issue, we have selected a number of excerpts from different companies that have generally taken a forward position on business and human rights and are considered leaders in reporting in their sector. We provide a brief analysis of each excerpt, highlighting strengths in the insights it offers, and note some elements that could make it stronger.
In March 2020, Shift published the first two issues of the series:
ISSUE 1 – Engagement with Vulnerable Stakeholders
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This resource is meant to serve as a guide for investors and others in analyzing companies’ disclosure on their stakeholder engagement practices. The aim is to help readers identify potential strengths and gaps in the underlying performance of the company in engaging vulnerable groups.
This resource uses company reporting from Marks & Spencer, Best Buy, Teck, Adidas and Rio Tinto.
ISSUE 2 – Efforts to Tackle Gender-Based Impacts
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This resource uses excerpts from companies’ reporting on their efforts to tackle gender-based impacts. In particular, it looks at whether a company’s disclosure indicates that it sees gender impacts as relevant for business; whether a company’s disclosure suggests it has real insights into women’s experience in the workplace; and whether a company’s disclosure suggests it is alert to other dimensions of gender-based discrimination.
ISSUE 3 – Risk Identification
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This resource focuses on excerpts from company reporting on setting targets and tracking performance. Specifically, it examines whether the company only reports on issues it deems material to the business; if the only indicated external input for the human rights issues the company prioritizes is a generic survey; if a company’s list of material issues includes both individual human rights and a category of ‘human rights’; and whether human rights issues are listed in company disclosure without further explanation of how these relate to the business’s own operations and value chain.
Issue three uses company reporting from Total, Nestlé, ABN AMRO, Newmont and Pepsico.
ISSUE 4 – Taking Action on Systemic Human Rights Challenges
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This resource focuses on excerpts from company reporting on systemic human rights challenges. Specifically, it looks at whether the company positions itself solely as part of the solution to the human rights challenge concerned; whether the company only reports its membership in groups or collective initiatives that tackle certain systemic human rights risks without describing its engagement with these initiatives and how this contributes to change; and whether the company reports on any actions it has taken unilaterally to address its own potential involvement with that issue.
The fourth issue uses company reporting from H&M, ASOS, Mondelez, Anglo American and Microsoft.
ISSUE 5 – Examples of Targeted Action
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This resource focuses on examples from companies of targeted action. It delves into whether the company only reports generally on its process for identifying and addressing human rights impacts; whether the company reports on how the perspectives of affected stakeholders informed its understanding of the impact and its decisions on what action to take; and whether the company talks about engagement with suppliers or other business partners on human rights-related issues in terms of compliance.
This resource uses company reporting from ING, M&S, FMO, ASOS and Unilever.
ISSUE 6 – Setting Targets and Tracking Performance
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The final issue focuses on excerpts from company reporting on setting targets and tracking performance. It looks at whether the company’s targets set and track in reporting are limited to activities or outputs; whether the company follows up on the extent to which all of targets set in one reporting period were met in the next; and whether data on human rights performance is aggregated such that meaningful insights cannot be drawn from the disclosure.
This resource uses company reporting from Unilever, Nestlé, Teck, M&S and C&A.
Efforts to Tackle Gender-Based Impacts
Increasingly, investors are becoming interested in understanding to what extent companies are respecting human rights, and whether their efforts are likely to improve the lives of affected people. A good place to start is by reading a company’s human rights disclosure. But company reports are often hard to analyze. On the surface, many companies will seem to be doing the right thing. But, how can investors tell whether what they are reading is meaningful and in line with what the UN Guiding Principles expect? This collection of resources was designed by Shift to help investors apply a people-centered approach to gain deeper insights from company disclosure.
In particular, this resource uses excerpts from companies’ reporting on their efforts to tackle gender-based impacts. In particular, it looks at:
- Whether a company’s disclosure indicates that it sees gender impacts as relevant and important for its business;
- Whether a company’s disclosure suggests it has real insight into women’s experience in the workplace;
- Whether a company’s disclosure suggests it is alert to other dimensions of gender-based discrimination.
This may also be a useful tool for practitioners within businesses who want to improve how they report on these issues, and for other stakeholders who are interested in analyzing and assessing the quality of a company’s human rights disclosure.
Engagement with Vulnerable Stakeholders
Increasingly, investors are becoming interested in understanding to what extent companies are respecting human rights, and whether their efforts are likely to improve the lives of affected people. A good place to start is by reading a company’s human rights disclosure. But company reports are often hard to analyze. On the surface, many companies will seem to be doing the right thing. But, how can investors tell whether what they are reading is meaningful and in line with what the UN Guiding Principles expect? This collection of resources was designed by Shift to help investors apply a people-centered approach to gain deeper insights from company disclosure.
In particular, this resource uses excerpts from companies’ reporting on their engagement with vulnerable stakeholders. We have selected five excerpts from companies that have generally taken a forward position on business and human rights and are considered leaders in reporting within their sector. We provide a brief analysis of each excerpt highlighting strengths in the insights it offers and noting elements that could make it stronger.
This may also be a useful tool for practitioners within businesses who want to improve how they report on these issues, and for other stakeholders who are interested in analyzing and assessing the quality of a company’s human rights disclosure.
Tackling Modern Slavery through Financial Sector Leverage
This briefing paper was commissioned by the United Nations University, as part of the Liechtenstein Initiative for a Financial Sector Commission’s efforts to push beyond the boundaries of compliance towards creative financial sector action to prevent and address modern slavery and human trafficking.
Senior Advisor David Kovick and Managing Director, Rachel Davis provide observations and specific examples of what implementation of the UNGPs and related efforts by financial institutions looks like in practice today, including leading approaches, recurring challenges and immediate opportunities.
Supporting Norway’s Export Credit Agency on the Guiding Principles
“Shift has given us unique, expert insight and tools that have enabled us to pragmatically work toward our goal of effectively implementing the UN Guiding Principles.”
Kamil Zabielski, Senior Social and Human Rights Specialist, GIEK
Shift is pleased to have worked closely with the Norwegian Export Credit Guarantee Agency (Garanti-instituttet for eksportkreditt-GIEK) (“GIEK”) to help it further align its approach to environmental and social due diligence with the Guiding Principles.
GIEK is a recognized leader among the OECD group of Export Credit Agencies (ECAs) in the development of policies and practices to manage environmental and human rights impacts. GIEK was among the first ECAs to adopt an explicit environmental and human rights policy and associated due diligence procedure.
Shift provided expert support to GIEK in 2013 in the development of these policies. In 2014, Shift worked with GIEK to explore how it could strengthen its stakeholder engagement and grievance pathways with regard to the transactions it supports.
Also see: our work with various financial institutions on the Guiding Principles | suppport to the Norwegian OECD National Contact Point
Collaborating With the IFC on Guidance for High Risk Contexts
Jump to: Overview of our work with financial institutions on the Guiding Principles | Our report on human rights due diligence in high risk circumstances
In alignment with the International Finance Corporation’s (IFC) revised Performance Standards on Environmental and Social Sustainability, the IFC has been exploring the development good practice guidance for its private sector clients on the issue of human rights due diligence in high risk circumstances. Shift provided expert input to the IFC in 2013 on the content of potential guidance.
The Performance Standards’ requirements regarding the environmental and social due diligence processes that all IFC-financed projects must have in place are robust; however, the Performance Standards themselves recognize that, in certain high risk circumstances, it may be appropriate for companies to complement these processes with specific human rights due diligence (see Performance Standard 1, footnote 12). This raises two key framing questions that any guidance on this issue should address:
- Under what circumstances might specific human rights due diligence be appropriate;
- What should human rights due diligence entail in such high risk circumstances?
Any IFC guidance on these questions would need to be practical, relevant and grounded in the challenging realities facing companies that operate in complex, high-risk contexts. It should also build upon existing resources for companies on these issues, and seek to ensure a convergence of guidance wherever appropriate.
While the immediate audience for good practice guidance issued by the IFC is IFC client companies, the impact of the Performance Standards extends well beyond IFC-financed projects – providing a global benchmark referenced by numerous public and private financial institutions, as well as informing the policies and practices of many companies operating in emerging markets.
This collaboration informed a report that we published in 2015 on human rights due diligence in high risk circumstances.
Advising the Peruvian Financial Regulator on Improved Corporate Management of Social Conflict
Also see: Overview of our work with financial institutions on implementation of the Guiding Principles | Our report on the cost of corporate-community conflict
From 2012-2015, Shift was pleased to support the Superintendency of Banks, Insurers and Private Pension Funds (SBS) in Peru in the development and implementation of a new regulation to strengthen due diligence in the Peruvian financial sector. The regulation is available in Spanish (official) and English (unofficial) here.
Shift provided advisory support to the SBS regarding the development of a new regulation aimed at mitigating social conflict related to large investment projects in Peru. This initiative responded to the evidence that such conflict can increase credit risk and reduce the creditworthiness of projects and/or their primary suppliers that are directly or indirectly affected by social conflicts. | Jump to our report on the cost of conflict in the extractives sector
In recent years there has been considerable social conflict in Peru around major commercial projects, particularly in the extractive industries and forestry. This has in part resulted from local communities’ concerns about the impacts these projects may have on their livelihoods, welfare and human rights. These conflicts are seen to have implications for the credit risk of individual Peruvian banks, the stability of the Peruvian financial system, and the reputation of Peru as an investment location.
Shift worked with the SBS to look at how the elements of due diligence set out in the Guiding Principles could provide a useful reference point for the planned regulation. This advice focused on the role of effective community dialogue and engagement and grievance handling processes in ensuring that due diligence processes are effective in mitigating risks of social conflict.
The SBS has now issued the new regulation, which requires banks to pursue social and environmental risk management in relation to certain advisory services and loans for particular projects in Peru, including natural resource extraction projects. While the new regulation is framed in terms of social and environmental due diligence in general and emphasizes reduction of systemic risk, its greatest innovation lies in the human rights lens it brings to the requirements of banks, and in turn of their clients, including the assessment of the quality of client companies’ processes for engaging directly with potentially impacted communities and providing channels for them to raise grievances. In this regard, it reflects important features of human rights due diligence emphasized in the Guiding Principles.
During the development of the regulation, Shift was pleased to provide additional support to the SBS including delivering collaborative capacity building workshops for key SBS staff, joint with the Association of Banking Supervisors of the Americas (ASBA), as well as training for representatives from Peruvian banks that are subject to the new regulation.