The finance and banking sector plays a vital role in the world’s economy. For instance, the IMF estimates that the world’s gross domestic product is worth $79 trillion in 2017, while the value of shares traded on stock exchanges is $78.2 trillion, nearly equivalent to the global supply of goods and services.
These figures show that the finance and banking industry can have a significant impact on the global economy, including on human rights issues. Finance and banking institutions can be involved with adverse human rights impacts in respect to their own employees but importantly also through their business relationships in the financial value chain. For example, a bank can deny customers access to finance based on their race or provide project finance to an infrastructure project that displaces indigenous people. Minority equity stakes in food and beverage companies that routinely purchase produce from farms employing child labor can be held by a pension fund. Without human rights safeguards in place, a technology company that develops algorithmic technology for law enforcement can receive seed capital from a venture capital fund. The OECD released three guidance documents in 2019: Responsible Business Conduct for institutional investors, Due Diligence for Responsible Corporate Lending and Securities Underwriting, and Responsible Business Conduct Due Diligence for project and asset finance transactions. These documents provide practical considerations at each step of the due diligence process and clarify expectations for banks and investors regarding responsible business conduct. In response to stakeholders´ requests for further clarification, OHCHR provided authoritative interpretations on the application of the UNGPs in the context of the financial sector, such as when private sector banks act as nominee shareholders (2021), in the broader context of banking in respect to the different ways in which banks can ´cause´, ´contribute´ and ´be directly linked with´ negative human rights impacts (2017) and the application of UNGPs to minority shareholdings of institutional investors (2013).
The responsibility to respect human rights also extends to international development finance organisations such as the World Bank, International Finance Cooperation (IFC), European Bank for Reconstruction and Development (EBRD), European Investment bank (EIB), and investment funds operated by national governments (see Development finance institutions).
