Panel 1 – Case study 1
Sustainable Finance: Room for Social and Human Rights?
ShareAction - Background
ShareAction is a charity that has spent the past 12 years working to make investment a force for good. The vision is of an investment system that truly serves savers and communities, and protects the environment for the long term. The ShareAction movement demands reform in the ways large investors make decisions and account for them and seeks to develop a legal framework that gives citizens’ rights to information about where and how their assets are invested. The ambition is to ensure that people can see what happens to their money and become more engaged with the workings of the investment system. By improving corporate behaviour, ShareAction’s campaigns aim to make people’s lives better and to protect the environment. A current priority for ShareAction is to engage with the European Commission’s Action Plan to Financing Sustainable Growth, which forms the basis of this case study.
Case Study: Sustainable Finance: Room for Social and Human Rights?
Sustainable finance is the provision of finance to investments taking into account environmental, social, and governance considerations. Sustainable finance includes a strong green finance component that aims to support economic growth while reducing pressures on the environment; addressing green-house gas emissions and tackling pollution; and minimising waste and improving efficiency in the use of natural resources.
The European Union is strongly supporting the transition to a low-carbon, more resource-efficient and sustainable economy. In March 2018, the European Commission presented some of its regulatory initiatives to promote sustainable finance in the EU in its Action Plan to Financing Sustainable Growth. This important initiative aims to establish a framework to facilitate sustainable investment. A central element of that framework is the development of a unified classification system ('taxonomy') on what can be considered an environmentally sustainable economic activity. The idea behind the taxonomy is to create a list of activities and industries that are officially recognised as sustainable, or more precisely, environmentally friendly, climate-friendly, and socially responsible. It is believed that in the long term this can assist the financial industry in identifying green or sustainable activities (companies, projects etc) to be financed.
The EU’s work on developing an environmental taxonomy has attracted criticism for its explicitly ‘climate-first’ approach. In the drive to promote climate-friendly financial investment and to define what is ‘green’, the taxonomy misses the wider social aspect of sustainability. It underweights how human beings and their livelihoods might be affected by new ‘green’ investment strategies. Critics are concerned that the European Commission’s approach is in tension with other commitments incumbent on the EU to respect, protect, and fulfil human rights. This could incentivize the development of a new market in green financial products that have a negative impact on the enjoyment of human rights. For example, so-called ‘green grabbing’ in Africa, Amazonia and beyond has seen businesses like Carbonscape planning to dedicate 930 million hectares for the cultivation of biochar (a soil enriched with carbon) on so-called "under-used, marginal" lands in Africa, where farmers and pastoralists make their livelihoods.
Within the last couple of years, ShareAction and other NGOs have been working to bring human rights into the sustainable finance debate and, in particular, in relation to the design of a sustainable finance taxonomy. Nevertheless, they are struggling to get their message across. These difficulties stand, to a large extent, on a miscommunication problem. Apparently inspired by the relative success of environmentally-conscious groups to convince the financial services industry that environmental protection and, in particular, climate breakdown, can have a material impact on the financial return of their investments, the European Commission has emphasized the need to collect better data before a classification system for ‘socially impactful’ economic activities can be developed with any granularity. ShareAction and other NGOs, on the other hand, insist that the European Commission’s understanding of social impact and human rights is very narrow and very data-driven.
We invite applications from students and young scholars from any discipline to participate in a panel that will explore the issues surrounding attempts to encourage sustainable and rights-respecting finance. Drawing on your own disciplinary and methodological perspectives, consider one or more of the following set of problem questions and submit a response (up to 400 words) through this website. Try to be innovative and to think of creative ways to tackle the challenges specified.
- Following the European Commission’s data-driven approach, one way of solving this miscommunication problem is to measure the impact that social and human rights issues can have on financial returns, financial stability and similar considerations. How might we do that?
- What challenges (methodological or otherwise) might this data-driven approach encounter? Might this data-driven approach fail to cover important aspects of social and human rights issues? For example, are all risks associated with social and human rights issues financial in nature? Can a data-driven approach capture the full impact that finance can have on social and human rights issues?
- Can you think of any alternative solutions to the challenge of making finance more rights-respecting?
- Attempts to make economic regulation ‘human rights respecting’ have a long history – notably in the case of the international trade regime – but little concrete progress has been made in turning rhetoric into reality. What do you think are the challenges of making financial investment human rights respecting/realizing?
 For more information see https://shareaction.org/what-we-do/#Campaigns.
 See M. Leach, “Green grabbing”, Green Economy Coalition (31 July 2012), available at: https://www.greeneconomycoalition.org/news-analysis/green-grabbing-dark-side-green-economy.
 See ShareAction, “Human rights and Finance: What Next for EU Policy?” (March 2018), available at: https://shareaction.org/wp-content/uploads/2018/03/EUPolicy-HumanRightsFinance.pdf.
 See e.g. European Commission, Impact assessment accompanying taxonomy proposal (24 May 2018) SWD(2018) 264 final, pp. 62, 111. Full text available at: https://ec.europa.eu/info/law/better-regulation/initiatives/ares-2017-5524115_en#pe-2018-3333.