Human Rights Guidance Tool for the Financial Sector

Human Rights and the Finance Sector

Many of the direct human rights risks and issues faced by the finance sector are generic to all businesses, such as those relating to the treatment of employees, or to the development and communication of new products, or to labour relations in the supply chain when purchasing goods and services. A business can ensure that human rights are respected by specifying contractual standards in these areas.

However, when providing funding or financial advice to a business client, a financial institution can be exposed to the human rights concerns which relate to that business and its sector. This is due to the provision of support being seen as an endorsement of the activities of the client, as well as facilitating the continuation and development of the business.

Although a bank does not have the same degree of influence and control over client activities as it has over its own workforce and suppliers, there is a risk it can be associated with human rights violations perpetrated by a client.

A financial institution may be implicated by association if, for example:

  • the security personnel of a mining company reacts violently to on-site protests from local residents opposed to a mining development project which the bank is funding
  • general corporate funding is provided to a manufacturing company which has a reputation for compromising health and safety standards to maximise profits
  • project finance is provided for a new dam which will lead to forced relocation of indigenous people.

Financial institutions may also have contractual relationships with states or state entities. If the state has a poor human rights record, any bank providing funding may be perceived as complicit in the related human rights abuses. Banking licences generally require a degree of active support for the state (for example, by purchasing government bonds) which may be seen as a cautioning of human rights abuses on the state's territory, and incur particular reputational risk to the bank.

Payment of taxes can also be an issue. In states with a poor human rights record, this may be seen as supporting the state. On the other hand, paying taxes is a way of supporting the provision of basic services such as health and education. Transparency about tax payments can demonstrate that a bank is taking a rigorous approach to anti-corruption.

The Thun Group of Banks is an informal group of bank representatives that have been discussing the meaning of the Protect, Respect, Remedy Framework and Guiding Principles in relation to the activities of banks. It has produced a discussion paper on key aspects of the Guiding Principles. This includes guidance on integrating human rights due diligence across retail and private banking, corporate and investment banking, and asset management.
There is a link to the paper in Resources.

Retail banking

This tool does not specifically address retail customers and human rights issues. However in relation to retail customers, financial institutions should be aware of issues such as:

  • access to banking (provision for low-income or vulnerable customers/potential for discrimination in service provision)
  • financial literacy (support for financial education initiatives to assist customers in managing their money)
  • consumer indebtedness (prevention, management or advice for customers who experience financial difficulties)
  • customer service (responsible marketing and communications; provision of best advice; the potential for mis-selling; complaints handling)
  • money laundering (banks being used to move money between countries for illegal purposes).

Asset and portfolio management

The tool may also be useful for asset management analysts and portfolio managers in considering issues such as:

  • Investments in companies associated with human rights controversies. Increasingly, companies are being targeted about their shareholdings in companies with poor human rights records, even if those shareholdings are very small
  • Socially responsible investment (SRI) funds which take account of corporate approaches to human rights when making investments or deciding whether to retain or sell company shares. Whilst many mainstream investors do not acknowledge there is a material correlation between corporate responsibility and financial performance, SRI is increasing at a steady rate.

Asset Management example:

Public pension funds may apply human rights parameters to their portfolios. The investment guidelines of the Norwegian Government Pension Fund (US$700 billion) exclude investments judged to carry an unacceptable risk of association with human rights violations.

Identifying and assessing material human rights impacts

When evaluating the risks and opportunities of specific transactions, operational decisions or business relationships, banks can take reasonable steps to identify and assess material human rights aspects. Areas to take into account are identified below. Further information on many of the issues is included in this tool, and there are links in Resources.


  • Nature of government (democratic/undemocratic; stable/unstable)
  • Presence of internal or external conflict or oppression
  • Evidence of abuses of internationally recognised human rights
  • Indebtedness of the state
  • The capacity and capability of local infrastructure
  • Endemic corruption
  • Presence of international sanctions
  • Capital flight due to economic disruption. (This can have a major impact on the provision of basic services by the state and on the cost of essential items such as food.)


  • Region of operation (such as areas demonstrating weak governance or a poor human rights record)
  • Potential for products or services to be associated with human rights abuses (defence sector equipment)
  • Working conditions(health and safety/working hours/remuneration)
  • Profile of workforce (diversity/male-female ratio/minimum age)
  • Management practices and governance (staff training on human rights; transparency about tax payments; identification and mitigation of adverse human rights impacts of the business; the promotion of good practice)
  • Relevant codes of conduct (specific to the business or sector)
  • Criticism by media and other stakeholders of human rights practices

Project/facility capital

  • Reputation of project sponsors/government/lenders involved
  • Relocation of people/impact on indigenous communities
  • Potential damage to important historical, cultural or nature sites or community property or the environment
  • Consultation with, and obtaining of free, prior and informed consent of, affected groups and communities
  • Human rights impacts taken into account by project sponsors (particularly where local legislation is ineffective or below international standards)
  • Compliance, where relevant, with environmental and social impact assessment standards and principles (such as the International Finance Corporation Performance Standards or the Equator Principles)
  • Security of site, plant and equipment and access to site

General corporate finance

  • Overall conduct and reputation of company
  • Association with controversy or poor practice
  • Existence of human rights related policies
  • Existence of effective governance procedures
  • Extent and transparency of reporting
  • Countries and sectors of operation


December 2014     United Nations Environment Programme Finance Initiative