Thun Group has now taken on more fire, as it further tweaks guidelines to acknowledge that banks can be seen as contributing to human rights violations only in exceptional circumstances
Readers of this column will recall the goings-on of the Thun Group of Banks, and their stated commitment to human rights oversight in business dealings. In particular, liability—what some of us might call responsibility. As it turns out, that unsurprisingly remains the sticking point.
A pity. Because it began cordially enough, with goodwill even from cynical analysts. The Thun Group, an agglomerate of seven 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—takes its name from the Swiss town of Thun. It’s where the group’s early movers (Barclays, Credit Suisse, UBS and UniCredit) met seven years ago to develop a human rights rulebook for the banking sector.
On 2 October 2013, the group published that “initial guidance", covering retail, private, corporate and investment banking, and asset management. It was remarkable in import, employing human rights-friendly phrases like “the right thing to do" and “acting instead of waiting for legal requirements".
Of course, as I wrote at the time, the guideline expectedly offered cop outs like banks having less “degree of leverage…than popularly believed" over their clients’ human rights misbehaviour; and that “cannot be expected to become human rights ‘regulators’ as a surrogate for government", though this last is a fair point.
But who could argue with good intention and its potential of global impact? The Thun document provided several red flags. “Investing in companies (shares, bonds) with a challenging human rights track record or investing in countries (bonds) with a challenging human rights situation, on behalf of individual clients or institutional investors." Or “establishing and managing" funds of such companies and countries. Or this: “Establishing and managing funds around a topic that could be viewed critically from a human rights perspective (e.g., defence industry fund, fund focusing on the topic of security)."
The section on human rights due diligence in project finance listed points of stakeholder engagement; free, prior and informed consent of communities for projects; flagging high risk situations; the practicality of using “external advisors" in such situations; action plans for “risk mitigation"; and the need for public disclosure, establishing grievance mechanisms and continuous monitoring and reporting.
This guidance was by early 2017 vastly diluted, and Thun Group has since taken major public relations fire from human rights practitioners, academicians and watchdogs. Its updated discussion paper (Discussion Paper on the Implications of UN Guiding Principles 13 & 17 in a Corporate and Investment Banking Context) read like a handbook for deniability. It was based on the group’s definition of proximity—more precisely, distance—to human rights violation and so, liability for remedy.
The Thun Group stressed “own activities" of a bank or financial institution, a direct transactional link, as being cause for remedy. This is as opposed to “direct links" that might be construed if a client re-routes financing to such an operation, or where a client runs a human rights-vulnerable project through a subsidiary. The Thun Group offered several elaborate theoretical scenarios to drive home what it described as “decreasing level of proximity".
A key architect of the guiding principles, John Ruggie, a professor of human rights and international affairs at Harvard University’s Kennedy School of Government, wasn’t impressed. “(United Nations) Guiding Principles are not a Rorschach test into which anyone can read anything they like," Ruggie wrote in February 2017 to Christian Leitz, head, corporate responsibility, UBS, and convener, the Thun Group of Banks. Ruggie called the Group’s revised premise “factually incorrect" and “inconsistent with the UNGPs". Australian academic David Kinley headlined his March 2017 analysis of the discussion paper, “Artful Dodgers".
Now Leitz and the Thun Group have taken on more fire, as they further tweak guidelines to acknowledge that banks can be seen as contributing to human rights violations only in “exceptional circumstances". That’s being interpreted as a further cop out.
More on that developing and strongly-worded spat next week.
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.
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