Human rights and how to advance them through responsible banking practices

In this interview, Mariana Ruiz, Senior Social Development specialist at the European Investment Bank, tells us how banks can promote social justice by integrating human rights considerations into their lending practices and investment decisions. Do not miss Mariana’s five useful tips to make informed choices that align with your human rights principles.

Share on Linkedin

1. How can banks integrate human rights considerations into their lending practices and investment decisions to promote social justice and equality?

Most financial institutions have made explicit commitments to respect human rights, often in corporate human rights or sustainability policies. These commitments cover their internal activities, such as those related to their staff (non-discrimination in employment practices, etc.) and the staff of their suppliers (employment conditions of those providing catering or cleaning services, etc.). But these policies should also cover the rights of the people impacted by their lending activities. To operationalise these commitments, it is good practice for banks to set minimum standards that projects must meet to be eligible for finance. These are known as environmental and social safeguards. These safeguards should be integrated into the banks’ decision-making processes — meaning that, when deciding whether to finance a project, the bank doesn’t just consider the applicant’s ability to repay the loan. It also considers their ability to identify, assess, prevent, mitigate, and even remediate adverse impacts on the environment or the human rights of workers and the surrounding community.

2. What role do financial institutions play in advancing human rights by ensuring fair labour practices and supporting marginalised communities?

Internally, banks should have good labour practices that promote diversity and equality and should pay special attention to known labour problems in the industry, like excessive working hours or mental health. They can also lead by example. To promote gender equality, they should encourage female leadership. At the EIB Group, we are proud to have a female President, a female Secretary General and female CEO of the European Investment Fund.

When deciding whether to lend to a company or project, banks should consider the applicant’s portfolio and whether the relevant labour policies and practices align with European standards and values. They should seek out any information — from labour authorities, unions, or the media, for example — that might point to unethical labour practices.

Banks can also contractually require clients to apply good practices and monitor compliance until the loan is repaid. The bank’s own accountability mechanisms can be used to achieve compliance if there are shortcomings.

Finally, banks can actively support certain groups, like women, LGBTQI+, people with disabilities or marginalised communities. They can target entrepreneurs in these groups with specific product lines, or target companies that go above and beyond to promote their inclusion.

3. In what ways can banks leverage technology and data analytics to monitor and address human rights risks in their operations and supply chains?

With the advancement of AI, banks are beginning to work on using these technologies to identify risks, in particular human rights risks. Through machine learning, language models can be trained to review and extract information from environmental, social and governance (ESG) data for specific regions or sectors. Specialists can screen information this way, enabling banks to perform faster due diligence and more precisely understand the risks linked to their operations — and especially to value chains. Banks can support the tech industry in producing responsible, human rights-compliant AI models. They can also collaborate with other financial institutions to develop transparent, efficient models for use at industry level. For example, the International Finance Corporation has developed an AI analyst for ESG factors that it provides for free as a public good.

4. What collaborative efforts between banks, governments and civil society are most effective in advocating for human rights protection and upholding ethical standards in the financial sector?

To protect and uphold human rights, it is very important to have meaningful stakeholder engagement throughout the life cycle of each project, including good transparency and access to information. And this applies with respect to all levels: the project promoter (whether public or private), governments, businesses, financial institutions, and civil society organisations. Stakeholders are better equipped to detect and evaluate a project’s risks and impacts when information is readily available, especially for highly complex projects with global value chains.

The latest developments in the European sphere — the approval of the European Sustainability Reporting Standards last year and the newly endorsed Corporate Sustainability Due Diligence Directive — are hopefully going to significantly improve how business is done. Consumers and investors should be able to weigh the effects that companies and banks have on human rights when choosing which bank to use, where to invest or where to buy goods or services.

5 useful tips for consumers to make informed choices that align with human rights principles:

Personally, I would make these five recommendations:

Investigate the origins of goods you plan to purchase (for instance, when buying a book, the editor may be in country A while the printer is in country B).
Look out for quality labels (fairtrade, organic, no animal testing, etc.) and know what the standards are for using them (is the label meaningful?).
Consider what a product’s impact will be when it reaches the end of its useful life and ask manufacturing companies how their products should be disposed of.
Read the sustainability reports that will be issued under the European Sustainability Reporting Standards — ideally for all typical consumption, but especially when investing or consuming on a large scale.
Never underestimate the influence of our purchasing decisions, as customer awareness of projects, events and business models can be critical for positive change.

About the blog:

There is an urgent need for rapid transition to global sustainability. Business and industry have enormous social and environmental impacts. "Why does it matter?" is a bi-monthly blog that aims to elucidate this important topic through the eyes of our experts.

Don't miss out our experts' practical tips for your daily life and be part of the positive change.

Sustainability