Development finance institutions need proactive approach to remedy to avoid human rights violations – UN report

GENEVA / NEW YORK – Bilateral and multilateral development finance institutions (DFIs) should routinely plan to ensure the projects they finance do not harm people, and they and their clients should ensure effective remedy is readily available for any victims, the UN Human Rights Office said in a report published today.

Initiatives supported by DFIs, despite commendable efforts, often lead to adverse social and environment impacts on individuals and communities. Yet, according to available evidence and data, many people negatively affected by development projects are unable to access remedies for the harms they suffer.

“We all recognize that, as a matter of fundamental justice, when someone is harmed there should be consequences.  But there has often been a wide gap in the development financing context between the principle of the human right to remedy and what happens on the ground,” said UN High Commissioner for Human Rights Michelle Bachelet.

“Development finance institutions are not, and cannot be, responsible for all outcomes. But in their own processes they are ideally placed to assess risk, exercise due diligence and plan for adverse outcomes.  The clients they finance and who implement projects, as well States, are also bound to respect human rights and meet their responsibilities in these areas. All have roles to play in ensuring remedy is not an afterthought but central to their activities. Simply put: if you contribute to harm, you should contribute to remedy,” she added.

The report says that a stronger commitment and more proactive, robust approaches to remedy would help development finance institutions avoid causing or contributing to human rights violations, minimize their reputational risks, and help them to meet changing public expectations and norms concerning responsible business practices.

The report encourages the consistent and effective implementation of remedy, noting that reparations to redress the harms people experience may take many forms, including restitution, compensation, rehabilitation, satisfaction and guarantees of non-repetition. In many instances, these are most effective in combination.

Based on the UN Guiding Principles on Business and Human Rights, the report offers a framework and criteria to help development finance institution assess how and when they should contribute to remedy.

It cites specific examples from DFIs and commercial banks, as well as best practice, including, for example, a commercial bank operating in Southeast Asia publicly acknowledging that its due diligence had been inadequate with respect to a project it had partially financed which had forcibly displaced local communities, and then taking steps to use loan profits to assist those harmed.  

New accountability policies of the African Development Bank and International Finance Corporation are now also explicitly directed towards remedy, while the report also highlights that the United States International Development Finance Corporation now requires its clients to inform communities in which they have projects that the corporation has an independent accountability mechanism.

“Development finance institutions, and, in particular, the leading multilateral development banks, have consistently innovated and set new global standards on sustainability and accountability.  Their leadership and the power of their example are needed now, more than ever, on the issue of remedy. This is key to the durability of projects financed by them, and essential to maximizing their public good,” the High Commissioner concluded.

ENDS

Read the report here