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12 Dez 2023

World Benchmarking Alliance, Danish Institute for Human Rights (DIHR), Initiative pour un devoir de vigilance (IDV)

Multiple benchmarks show financial institutions struggling to demonstrate respect for human rights

Three benchmarks of financial institutions on human rights underline the need for inclusion of financial institutions in the currently negotiated EU Corporate Sustainability Due Diligence Directive.

Wednesday, 13 December trilogue negotiations related to the EU Corporate Sustainability Due Diligence Directive resume. One of the key remaining topics of discussion is the question of whether, and if so, how, the financial sector should be covered by the future due diligence obligation. A number of financial institutions and initiatives have expressed support for the inclusion of the sector however the negotiating parties remain divided.

Three complementary benchmarks now provide snapshots of financial institutions’ ability to document respect for human rights in Luxembourg, Denmark and globally [...]

Main findings:

Denmark 2023 Benchmark [22 biggest financial institutions from Denmark]:

  • The financial institutions on average score 5,4 out of 14 available points making the overall alignment score just 38%. None of the companies reached full score and only 6 institutions out of 22 scored higher than 50% and two institutions (both banks) score 0. [...]
  • Thematically the financial institutions overall perform best in relation to policy commitments and descriptions of processes to identify and act on human rights risks. The worst performing areas are engagement with affected stakeholders or their representatives as well as existence of grievance mechanisms and access to remedy.

Luxembourg 2023 Benchmark [10 largest Luxembourg based investment fund management companies]:

  • The companies on average scored 3.7 out of 10 available points (37%). None of the analysed companies reached the full score of 10 points, and only two companies reached more than half of the available points. Most companies scored only between 2 and 4 out of 10 points. One company, the largest Luxembourg based management company, scored zero out of 10 points.
  • The analysed companies score best on indicators that measure policies or the availability of specific mechanisms, and poorest on indicators that relate to existing practices. Although seven out of 10 companies commit to respecting human rights, there is no evidence that any of the companies carry out human rights due diligence.
  • While there are individual examples of what companies assess as their salient human rights risks or how they integrate these into their operations, no company indicates that it has comprehensive processes in place to identify, assess and integrate human rights risks into its financing activities.

Global 2022 Benchmark [400 most influential banks, asset owners, asset managers and insurers]:

  • [...] Just 12% of financial institutions meet any of [the due diligence] elements. However, three financial institutions disclose that they meet all, demonstrating the potential for others to improve their human rights due diligence.
  • Less than 10% of the 400 institutions assessed disclose the processes they have in place to identify human rights risks and impacts within their own operations, and less than 3% within their financing activities. [...]

The findings across the benchmarks affirm the need to align financial institutions’ ESG-practices more closely with business and human rights standards.