Table of Contents


Financial institutions, like any other business, should implement systematic monitoring processes through which to track human rights risks and impacts associated with their business and financing activities. Performance monitoring and reporting is also critically important for institutions to assess the effectiveness of their human rights due diligence and risk management / mitigation measures, as well as the performance of clients / investees over time. 


Effective monitoring requires a combination of indicators through which to assess evolving risk profiles and identify specific impacts. Strong indicator frameworks typically incorporate the following elements:




    

  • SMART (specific, measurable, appropriate, reliable, timebound)
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  • Tailored to specific operational contexts and regularly evaluated to ensure ongoing relevance and validity
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  • Incorporate a mix of quantitative and qualitative measures
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  • Based on systematic data collection frameworks and processes; that is, in line with an established framework and method, with regular periodic collection (e.g., annual) and secure storage of historic data
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  • Include strong predictors of business decision-making and behaviour
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  • Signal the quality of due diligence processes
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  • Offer insight into a company’s contribution to positive outcomes for people
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Overarching principles and guidelines


The following principles and guidelines can help to shape relevant indicators:


    

  • Integrate with existing systems: in many cases, human rights monitoring can be integrated into broader data collection, evaluation, and reporting processes. Conversely, financial institutions should include data on human rights performance as part of their regular reporting on both their own-business operations and financing performance.
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  • Assign responsibilities: clearly establishing internal responsibilities for human rights monitoring that are expressly incorporated as core job responsibilities and associated with corresponding performance indicators and targets. Importantly, these responsibilities should be integrated across different teams.
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  • Standardise data management tools: standardisation can help ensure effective and efficient monitoring. For example, a simple client / investee (self-)reporting tool can help standardize basic data collection on key human rights indicators (although additional forms of monitoring will be required for higher risk investment contexts). Where possible, requirements to collect and manage data should be integrated into contracts.
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  • Tailor monitoring intensity: monitoring and reporting activities should be appropriate to the nature and level of risks identified. High-risk clients/investees may be subject to more frequent and detailed monitoring (including site visits).
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  • Review and adapt: monitoring frameworks should be regularly assessed against the evolving risk profile of the business activity or investment and adjusted accordingly.
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  • Engaging stakeholders: monitoring efforts can benefit from ongoing stakeholder feedback, including both internal and external sources (e.g. affected or potentially affected stakeholders). This can ensure that measures are relevant and continue to be effective. Further information is included in the section on ‘Stakeholder engagement‘.
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Case study: the Investor Initiative on Human Rights Data




The Church Commissioners, Aviva Investors and Scottish Widows have launched the Investor Initiative on Human Rights Data (II-HRD), which aims to improve the quality of corporate human rights data available to investors. They emphasize the need for having access to ‘the right data, for the right companies’ in order to be able to hold investees accountable on Human Rights.












Case study: Rabobank indicators to monitor client performance




As part of core business, Rabobank measures the social and environmental impact of clients via their Client Photo and ‘Sustainability Matrix.’ All potential and current business clients with an exposure > EUR 1 million are assessed through a ‘Client Photo’, based on Rabobank’s Global Standard on Sustainable Development and taking into account client metrics benchmarked with industry / sector specific indicators, followed by professional judgment. This is part of the monitoring and credit approval processes. The purpose of the Client Photo is to improve client engagement and business development and is used as a management tool.










 


Example indicators


The focus of monitoring and relevant indicators will vary depending on transaction and portfolio characteristics. However, most FIs will focus on risks related to the selection of clients or investees (and / or external investment managers) and the performance of client or investee companies concerning human rights. This might include risks and impacts related to workers engaged by clients or investees and / or impacts on local communities. A brief overview of example indicators can be found here (PDF).






Case study: benchmarking and indicators


BankTrack’s Global Human Rights Benchmark evaluates 50 of the largest global banks against criteria aligned with the UNGPs. Several challenges and notable practices have been identified in relation to indicators. Banks are increasingly integrating human rights indicators in their reporting. Rabobank provided indicators relating to types and numbers of issues identified, including human rights abuses, impacts on communities and Indigenous peoples, and labour rights issues. It also included figures indicating the status of progress towards addressing each identified impact.










Further reading