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Banks and the human rights shuffle

LiveMint logoLiveMint 30-03-2017 Sudeep Chakravarti

One of the key reasons I’ve been following the Thun Group of Banks is on account of the human rights implications for global and Indian banks engaged in project and corporate financing in India, and for overseas entities of Indian businesses. While that is a trail of accountability worth the investigative journey, last week I addressed a larger picture (The Thun Group’s artful dodge, published on 24 March). A furore has erupted over a position paper.

The Thun Group is 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—that takes its name from the Swiss town of Thun. It’s where the group’s early movers met six years ago to develop a dynamic human rights Blue Book, if you will, for due diligence and delivery for the banking sector.

But its latest paper (Discussion Paper on the Implications of UN Guiding Principles 13 & 17 in a Corporate and Investment Banking Context) from earlier this year reads like a handbook for deniability. It is based on the group’s definition of proximity—more precisely, distance—to a real or potential human rights violation and so, liability for all manner of remedial measures.

The Thun Group stresses “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 offers several elaborate theoretical scenarios to drive home what it describes as “decreasing level of proximity”.

Only, that’s not how human rights liability—indeed, responsibility—is generally viewed by the human rights universe outside the Thun Group. The premise of human rights due diligence in supply chains, for instance, is built and executed on the logic of responsibility across the chain.

“It does seem odd... for the banking sector to seek to restrict the reach of its power and responsibilities in respect of human rights outcomes, at the very time when other sectors—notably retail—are yielding to pressure to delve deeper into their supply chains to identify and address abusive practices,” wrote David Kinley, chair of human rights law at Sydney Law School, University of Sydney in a rebuttal this March.

Kinley’s paper, titled Artful Dodgers: Banks and their Human Rights Responsibilities, offers the case of “major high street retailers” being unable to absolve themselves of responsibility in the case of the Rana Plaza disaster in a suburb of Dhaka, in April 2013 that killed more than 1,100 garment workers of entities contracted by such retailers—and sub-contracted in turn. More than 2,000 workers were injured. “Yet this is precisely” the logic of a Thun Group case study, Kinley points out.

Kinley suggests—and I agree completely—that “finance” must shed its “exceptionalist” tag. Many other human rights specialists, in particular the global dean of business and human rights, as it were, John Ruggie, have harsher words for the Thun Group.

There is a live situation for the Thun Group—the sector at large—to walk its talk. On 21 March, Thun Group constituent ING Bank formally announced that it had “sold” its $120 million “stake” in the $2.5 billion consortium loan to the controversial Dakota Access Pipeline project in United States, after a dialogue with the Standing Rock Sioux Tribe. In an elaborate graphic sequence ING detailed how “After we got involved” (this, after due diligence) it “learned” of major objections from the tribe on matters of respecting traditional grounds and threat to water sources from the project to pipe fuel, “called on the client to work for a solution” and “denounced” violence by police and paramilitaries against protesters.

On 26 March, Norwegian financial services major DNB ASA announced it had sold its loan exposure in the project, which Reuters quoted Norwegian media to estimate at $331 million.

While that is remarkable, several other Thun Group constituents, besides other globally renowned investment banking operations, continue to have sizeable credit exposure with Sunoco Logistics Partners and Energy Transfer Partners—which oversees the Dakota Access Pipeline, and with which Sunoco announced a merger last November. A subsidiary of a Thun Group constituent still has exposure in the Dakota Access Pipeline.

And of course some entities, they won’t disclose which, bought out ING and DNB’s loans. So it goes.

Sudeep Chakravarti’s books include Clear.Hold.Build: Hard Lessons of Business and Human Rights in India, Red Sun: Travels in Naxalite Country and Highway 39: Journeys through a Fractured Land. This column, which focuses on conflict situations and the convergence of businesses and human rights, runs on Thursdays.

Respond to this column at rootcause@livemint.com.

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