“Exceptional circumstances". That’s the Thun Group assertion around which last week’s column (Thun Group: in the line of fire once again) addressed the liability and responsibility of banks for human rights violations by its clients. It has expectedly upset human rights watchdogs and commentators who engaged with the group that derives its name from a small Swiss town, where it met in 2011 to lay out a human rights blueprint for banks and financiers.
It’s a gathering of seven major banks: Barclays Plc., Credit Suisse Group AG, UBS AG, UniCredit SpA, Banco Bilbao Vizcaya Argentaria SA, ING Bank NV and Royal Bank of Scotland Group Plc. And that is the point. When such a group makes statements of intent and then walks back from them, there will naturally be accusations of glib public relations at best, and an elaborate snow job at worst.
The spat has been ongoing for more than a year, since the Group published a “discussion paper" in January 2017, drawing elaborate models of distancing. Basically, except for direct financing to a special purpose vehicle, nearly all aspects of what it terms general corporate finance, either through a parent company—the client—or a subsidiary of that parent, carry little or no link were any human rights issues or violations to emerge. Banks, the paper suggested, can’t be held responsible for the downstream actions of its clients.
That sticks out in a world in which increasingly, the premise of human rights due diligence in any activity chain, a supply chain, for instance, is built and executed on the logic of responsibility across the chain.
“We consider that banks can and unfortunately do contribute to human rights violations when providing financial products and services, and that while such occasions may not represent a high proportion of a bank’s transactions, in absolute number they are rather common, and their impact is significant," a group of watchdogs and Europe-based analysts wrote in late March to Thun Group convener, Christian Leitz, who is also head, corporate responsibility, UBS.
The most vociferous of the group is Netherlands-based BankTrack, alongside banking, finance and corporate transparency watchdogs from the United States, United Kingdom, Luxembourg, Switzerland, Germany, Australia and Brazil.
BankTrack attempts to nail banks in a December 2017 briefing paper which details eight instances of human rights violations and humanitarian crises. These instances, which would surely resonate in India, with its myriad instances of minimal human rights due diligence by banks, include the Dakota Access Pipeline in the United States, the Trans Mountain pipeline project in Canada, the Agua Zarca hydroelectric project in Honduras, and issues with the Phnom Penh Sugar Company in Cambodia, a country increasingly cited for government heavy handedness in dealing with critics of forced land acquisition and displacement issues.
It hasn’t been comfortable for Thun Group constituents, let alone others. On 21 March 2017, Group constituent ING Bank formally announced that it had “sold" its $120 million “stake" in the $2.5 billion consortium loan to the controversial Dakota Access Pipeline project in United States, after a dialogue with the Standing Rock Sioux tribe.
There is little discussion since on who bought out the loan, or that other Thun Group constituents have credit exposure to businesses that oversee the pipeline.
It’s a bit like the ethical banking smoke-and-mirrors applied by HSBC Holdings, which announced on 20 April 2018 that it would withdraw from “the coal-fired power sector" as part of an effort “to support a transition to a low-carbon economy". The assertion was backstopped by Daniel Klier, group head of strategy and global head of sustainable finance, HSBC.
Besides other loopholes in its “Energy Policy", in the same breath HSBC stressed a caveat: apart from Bangladesh, Indonesia and Vietnam. “A targeted and time-limited exception will apply to these three countries in order to appropriately balance local humanitarian needs with the need to transition to a low-carbon economy."
Who can argue with such exceptional circumstances?
Sudeep Chakravarti’s books include Clear.Hold.Build: Hard Lessons of Business and Human Rights in India, Red Sun and Highway 39.
This column focuses on conflict situations and the convergence of businesses and human rights and runs on Thursdays.