(Munich/Berlin, February 16, 2016) – On the occasion of the United Nations “World Day of Social Justice” on the 20th of February 2016, the Berlin NGO FACING FINANCE e. V. presents its DIRTY PROFITS 4 report. The report proves: Companies’ and Bank’s self-commitments are incapable of preventing conflicts with social and ecological standards and norms, which harm the population and environment.
17 researchers from 10 countries describe 50 cases of human rights abuse, corruption, exploitation of workers, and destruction of the environment, caused by the business activities of 20 global active companies (e.g. ExxonMobil, Zara, Nestlé, HeidelbergCement and Sanofi) and the financial institutions cooperating with them (e.g. Deutsche Bank and Allianz). The 20 companies have total revenues of more than one trillion Euros with a profit of more than 83 billion Euros. The OECD lists complaints against 8 of these companies.
The DIRTY PROFITS 4 report reveals extensive deficits in the companies’ and Bank’s self-commitments. This refers especially to the fields of human rights as well as environmental and climate protection. 18 of 20 of the analyzed companies are involved in one or several cases of human rights abuse. The report shows that 13 of the 20 companies bear the guilt of environmental pollution and climate destruction. 10 companies have violated labor rights, whereas 6 companies are involved in corruption and bribery. “We cannot allow the banks and companies to self-regulate, behind closed doors, significant considerations such as human rights and the environment.”, says Thomas Küchenmeister from Facing Finance
Despite 16 of the 20 companies being on the exclusion list of hundreds on international investors, 12 analyzed financial institutions still have financial ties with these companies. For instance, the financial institutions in the report invested more than 55 billion Euros in ExxonMobil, which is, to date, responsible for 47 billion tons of carbon emission. The DIRTY PROFITS report proves that 5 of the 12 selected financial institutions have financial ties to all of the 20 controversial companies (for example Allianz und BlackRock). Deutsche Bank cooperates with 19 of the companies in the report. The main underwriter of shares and bonds and loan provider are for example HSBC (9.9 and 2.2 billion Euros) and Deutsche Bank (7.9 and 1.1 billion Euros). Vanguard is also tied to all controversial companies (74 billion Euros), in many cases as an asset manager by order of a third party.
In 2012, the United Nations human rights council passed a global standard to prevent and rectify human right violations caused by economical activities, the GUIDINGD PRINCIPLES OF BUSINESS AND HUMAN RIGHTS. But the investigated banks and companies hardly respect these principles. Only 6 out of 20 companies mention or support the Guiding Principles on their websites. The findings on the homepages of the financial institutions are similar. Only 3 out of 12 financial institutions (e.g. Deutsche Bank) mention the Guiding Principles as a standard, to which attention should be paid to. None of the evaluated Banks (without the Asset Manager) have implemented specific guidelines, for example in terms of business partner using forced labor.
“One half of the analyzed financial institution is not even willing to accept non-binding minimal standards, e.g. the UN Global Compact”, deplores Thomas Küchenmeister. Only 5 out of the 12 selected financial institutions apply the Equator Principles, a voluntary set of rules for Banks to compliance environmental and social standards for the funding of projects.
To fully consider environmental and social standards, financial institutions have to exclude businesses from their investments that:
- disrespect fundamental international labor and human rights;
- engage in environmental destruction;
- profit from massive corruption or that apparently integrate corruption as an element of their business model;
- produce controversial weapons;
- conduct business activities in violation of international law, or invest in conflict regions.
Financial institutions must implement extensive guidelines, which ensure the compliance of human and environmental rights. Financial institutions should establish an easily accessible and effective grievance mechanism for individuals or communities who feel adversely affected. Furthermore, they should improve the transparency in terms of the social and environmental impact of their business and investments.
Apparently, voluntary commitments are not sufficient. For this reason, financial institutions and companies have to be obligated by law to report the extent to which ESG concerns are taken into account in corporate decision-making and the social and environmental impact they have. The German federal government has to transpose the EU Directive (2014/95/EU) for Non-Financial Reporting into German law and should apply the disclosure obligation not only on the major and listed companies. The federal government should ensure that the implementation of the UN Guiding Principles on Business and Human Rights take account of the responsibility of the financial sector.
A response from AngloAmerican to Dirty Profits 4 is available here
Geschäftsführender Vorstand Facing Finance e. V.
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