UN says banks responsible for human rights

October 8, 2021

Banks holding shares on behalf of clients are still responsible for human rights due diligence at the companies whose shares they hold, according to the UN.

The UN's Office of the High Commissioner for Human Rights (OHCHR) has ruled that banks have oversight responsibilities relating to the impact of companies in which they hold shares on behalf of clients.

The advice, which did not reference any specific bank or investments, was requested by BankTrack and OECD Watch, following a decision by the Swiss National Contact Point (NCP).

It followed a complaint from the Society for Threatened Peoples (STP) against Swiss bank UBS regarding its business relationship with Hikvision, a video surveillance firm that is aiding China’s mass surveillance and genocide of Uighurs.

The OHCHR said purchasing and holding shares of an investee company constitutes a "business relationship" between a financial institution and an investee company under the UN's Guiding Principles on Business and Human Rights. It challenges the argument that banks hold little or no responsibility when its clients are the beneficial owners of the shares.

It advises institutions to use a "two-pronged approach" to identify human right risks. This includes an assessment of risks connected to its beneficial owner clients as well as undertaking due diligence on high-risk investee companies.

Banks that cannot prevent or mitigate impacts should consider ending the relationship, said the OHCHR.

Alongside this, the OHCHR said that financial institutions should formally report how they address severe human rights risks, as well as adverse impacts connected to its activities, products, and services.

Ryan Brightwell, human rights campaign coordinator at BankTrack, welcomed the clarification from the OHCHR.

"The UBS case is not the first time banks have attempted to avoid their responsibilities where they act as custodians of shares in companies with damaging impacts," he said. "This issue comes up time and again, and the argument from banks that they have no relationship with the companies concerned flies in the face of common sense.

"We hope it will be influential in ensuring banks extend their environmental and human rights due diligence to include custodian shareholdings."

Joseph Wilde-Ramsing, senior adviser to OECD Watch, said that the clarification also highlighted the need for a “thorough discussion” within the OECD on passive investments and due diligence. This latest development comes after the UN recently highlighted short-termism as hampering human rights efforts.