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The Thun Group’s artful dodge

LiveMint logoLiveMint 24-03-2017 Sudeep Chakravarti

For a sector that lives or dies on degrees of liability, it is hardly surprising that the Thun Group of Banks would be candidates for a cop-out with regard to human rights.

But proponents of human rights, this columnist included, gave it a handsome chance for several years. Because it’s not often that finance majors discuss human rights, even though the lofty thought “Are we financing human rights violations?” has the grounded concern: “We could be liable, right?”

Now the pivotal group which comprises several global financial majors has spun a web of convoluted logic to distance the industry from potential liabilities arising out of corporate and project financing. The Thun Group has drawn much flak over the past couple of months since it released its latest “discussion paper”. Australian academic David Kinley headlined his March 2017 analysis of it “Artful Dodgers”.

The Thun Group’s paper focuses on two aspects of the United Nations Guiding Principles on Business and Human Rights, the global mantra on this matter since it was endorsed by the United Nations’ Human Rights Council in 2011. Principle 13 calls businesses to “avoid causing or contributing to adverse human rights impacts through their own activities, and address such impacts when they occur” and to “seek to prevent or mitigate adverse human rights impacts that are directly linked to their operations, products or services by their business relationships, even if they have not contributed to those impacts”.

Principle 17 focuses on due diligence. “In order to identify, prevent, mitigate and account for how they address their adverse human rights impacts,” it suggests, “business enterprises should carry out human rights due diligence”. This applies to actual and potential human rights impacts, and underscores Principle 13.

The Thun Group now maintains (the italics are from its wordily titled report Discussion Paper on the Implications of UN Guiding Principles 13 & 17 in a Corporate and Investment Banking Context) that “a bank may, in certain circumstances, be directly linked to an impact caused or contributed to by a client”. “In this context”, the report adds, “access to remedy, as considered by the UNGPs, does not apply. This requirement will generally apply to banks only in the context of adverse human rights impacts caused or contributed to via their own activities, notably through actions or omissions affecting their employment practices”.

A key architect of the guiding principles, John Ruggie, now a professor of human rights and international affairs at Harvard University, is livid. “UN Guiding Principles are not a Rorschach test into which anyone can read anything they like,” Ruggie wrote in end-February to Christian Leitz, head, corporate responsibility, UBS, and convener, the Thun Group of Banks. “The idea that banks can only ‘contribute to’ human rights harm through their ‘own’ activities as opposed to their relationships with clients is simply factually incorrect, not to mention being inconsistent with the UNGPs.”

I will discuss the Thun Group’s wiggle-room points (which use flow charts and case studies) and critiques next week, but let me meanwhile bring you up to speed on the origin and expectation of its undeniably important initiative.

An agglomerate of four banks—Barclays Plc., Credit Suisse Group AG, UBS AG and UniCredit SpA—was formed in the small Swiss town of Thun in early 2011. What has since come to be known as the Thun Group declared in early 2013 that it would address “challenges we face as universal banks when addressing human rights issues, notably the scope and depth of our human rights-related responsibilities and the due diligence requirements commensurate to these”.

It did, in October 2013. The initial four had meanwhile been joined by three more heavyweights: Banco Bilbao Vizcaya Argentaria SA, ING Bank NV and Royal Bank of Scotland Group Plc. This beefed-up group issued what it termed “(An) initial guidance to banks keen to address human rights issues in their core business activities—both to minimize potential adverse impacts to rights holders and related risks to banks, and to identify opportunities to promote good practice”. For inspiration it looked specifically to Guiding Principles 16-21 that relate to corporate responsibility to respect human rights.

As I wrote in this column at the time (A human rights code for banks, published in October 2013), even if the mechanisms for human rights delivery are far from perfect and far from forming the DNA of most businesses and governments, the weight of the names involved in the Thun Group alone demands attention.

But is the Thun Group just a snow job?

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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