Banks may not be meeting their obligations to respect human rights and could be increasing the hardships faced by some of the world’s poorest, according to Oxfam Australia.
While Oxfam welcomes the initiative of some Australian banks such as ANZ, Westpac and NAB, to commit to the Equator Principles, a set of social and environmental benchmarks to govern their lending decisions, a new report shows that the standards are not enough to ensure that human rights are respected in projects financed by the banks.
“Banks who sign up to the Equator Principles are at continuing risk of financing projects that fail to uphold human rights,” said Oxfam Australia Executive Director, Andrew Hewett.
Mr Hewett called on Equator Principle banks and the World Bank’s private sector lending arm to significantly amend the standards they rely on to make sure that their lending criteria are consistent with internationally recognized human rights.
In the meantime, they need to go beyond those standards to implement better screening practices and should ensure that their borrowers have rights-based grievance mechanisms for affected communities.
The new report, The International Finance Corporation’s Performance Standards and the Equator Principles: Respecting Human Rights and Remedying Violations? was prepared by the Center for International Environmental Law (CIEL) and the Bank Information Center (BIC), with support from World Resources Institute, Oxfam Australia and Banktrack. It is available at www.ciel.org.
Submitted to the United Nations Special Representative on business and human rights, Professor John Ruggie, it finds that the Equator Principles and the standards used by the World Bank’s private lending arm fail to address most critical human rights and address many others only partially or inadequately.
“The findings of the report are a major concern,” according to Mr Hewett. “Australian banks should be aware that signing the Equator Principles does not mean the projects they finance respect human rights – including the rights to life, property, food and health.”
The report also sends a warning to the Australian Government. The Australian Government owns the Export Finance and Insurance Corporation (EFIC), which provides financial assistance to Australian companies overseas. EFIC relies on the same standards as the World Bank, which the report found to be inadequate for ensuring respect for human rights.
The report also found the standards failed to ensure rights-based grievance mechanisms for communities adversely affected by a project. “Through Oxfam Australia’s Mining Ombudsman program, we have documented that a failure to respect human rights, and a failure to have effective grievance mechanisms, can not only leave communities worse off but can also lead to financial failure,” Mr Hewett said.
He drew attention to the Australian mining company Lafayette, operator of the Rapu Rapu copper and zinc mine in the Philippines, which went into voluntary administration in December 2007. The company had failed to sustain community approval; months after the start of mine operations, two cyanide-laden spills into the sea killed the fish that communities relied upon for their livelihoods, resulting in families struggling to find enough to eat.
“During that time, ANZ and other banks who signed the Equator principles continued to prop up the company,” Mr Hewett said. “Signing onto the Principles has not led to ANZ or other banks ensuring respect for human rights. The end result was people in developing countries lost out.”
The submission to Professor Ruggie follows his report to the United Nations in June, which
called on governments to close legal loopholes, and on companies to respect human rights.
For more information, please contact Laurelle Keough, media liaison coordinator – advocacy and campaigns, at Oxfam Australia, on 0409 960 100, email@example.com
Notes to editors:
The Equator Principles are a set of environmental and social benchmarks for managing environmental and social issues in development project finance throughout the world.
Once adopted by banks and other financial institutions, the Equator Principles commit the adoptees to refrain from financing projects that fail to follow the processes defined by the Principles.
The Equator Principles were developed by private sector banks – led by Citigroup, ABN AMRO, Barclays and WestLB – and were launched in June 2003.
The banks chose to model the Equator Principles on the environmental standards of the World Bank and the social policies of its private sector lending arm, the International Finance Corporation (IFC).
In July 2006, the Equator Principles were revised to increase their scope.
In June 2008, UN Special Representative on Business and Human Rights, Professor John Ruggie, proposed a framework to ensure that the business community around the world respects the people whose lives are affected by their practices. The report also identified the responsibility of companies to respect human rights.
The framework calls on governments to close legal loopholes and gaps that allow companies to conduct business without respect for human rights. The report calls for action to be taken both in the countries where companies operate as well as in their ‘home’ countries, such as Australia.