Why benchmark human rights in financial services?

The link between financial services’ business activities and their human rights impacts are not well understood. Publicly benchmarking performance can create pressure to improve: our benchmark offers a snapshot of FSE performance and a way toward better outcomes.

Benchmarking is a form of ‘relative performance evaluation’ (or RPE) used by Financial Service Entities (FSE) across their activities.

As these companies are used to seeing ‘league tables’ ranking their performance against peers, the industry should be open to accepting a benchmark to measure human rights performance throughout the sector.

A race to the top

Benchmarking performance can create a race to the top in respect of all these hidden (and not so hidden) problem areas.

Concerned about their reputation, FSEs will seek to improve their standing by addressing any issues leading to a lesser result than their peers when that is highlighted by a league table.

Our expectations in relation to their human rights performances are no different. Our benchmark offers not only a snapshot of where FSE performance is at (relating to FY2019), but also a way for FSEs to navigate their way to better performance.

Why it’s difficult to measure human rights

The challenge with benchmarking human rights relates to the differences in human rights risks and how these vary between industries. A good illustration of this is the Corporate Human Rights Benchmark (CHRB).

Its first report targeted three industry sectors: agricultural, apparel and extractive industries.

All three industries have tangible outputs and are well known for their problematic practices around core International Labour Organization (ILO) obligations re their workers.

These sectors are ‘known knowns’ in terms of human rights impacts. Financial services and human rights are not as well understood.

Typically, in terms of human rights concerns, finance is understood in terms of project finance that supports governments or individual businesses involved in human rights abuses. Investment managers also face human rights issues when an investee company is accused of human rights transgressions.

Given the accumulated wealth in the financial services industry, employees’ human rights, for example, isn’t typically front-of-mind because low wages and poor working conditions are not apparent problems.

Nor, also, is much attention paid to human rights implications of mis-selling retail financial products (mortgages, insurance policies) or to poor (or non-existent) human rights due diligence processes applied to FSEs’ investment portfolios.

Pathways to better performance

As we note in our 2020 Report, FSEs need to improve their governance of human rights risks across five areas – retail, commercial lending investment & services, employees, supply chain, society – as a critical first step on the journey to improved human rights performance. Policy positions without strong governance won’t achieve good outcomes.

Our 13 governance indicators1 start with recognition by the FSE that its activities can have human rights impacts on particular groups and a commitment to respect the human rights of each of these groups. For some of our sample FSEs, this is where their journey to improvement begins.

For other sample FSEs who have some form of recognition and commitment, their first step may be to strengthen existing commitments by considering our six human rights categories2 – privacy & information, anti-discrimination, economic security, health & safety, voice & participation, right to remedy – and reflecting upon the breadth of their current statements against the breadth demanded by our benchmark.

Our remaining governance indicators set out the accountability mechanisms necessary to achieve these changes. Board responsibility and clear lines of accountability, as well as engagement, information flows and human rights skills/expertise work together to create the basic accountability framework.

Our benchmark uses a traffic light system (red-amber-green) to indicate our assessment of a company’s performance within an area of impact.

The final core component of this accountability framework is to involve the FSE’s risk function, a core function and source of risk expertise within any FSE, in assessing human rights risks.

Remuneration schemes and disciplinary schemes are considered by governance indicators 11 and 12. They support the capacity of the accountability framework to deliver on the commitments to recognise and respect. When these schemes are poorly designed, accountability for human rights risks can fail.

Two governance indicators involve audit. Both internal and external audit can play a role in confirming human rights outcomes. We found a few examples of limited third-party assurance being given for environmental data and diversity data. Such assurance could easily be extended to other items.

Our final indicator compares the FSE’s statement of corporate values and culture with our six human rights categories to see if this important internal compass is directed toward true human rights respect.

By achieving synergy between these indicators, and removing dissonance, we believe FSEs can achieve stronger governance of human rights risks.

Visit the Financial Services Human Rights Benchmark website to learn more about our methodology as well as individual report cards for each of the 22 ASX-listed financial companies we evaulated.


Dr Kym Sheehan is a Corporate Law expert and lead designer of the benchmark. Follow Kym on Twitter at @kymm_sheehan and read more about her research interests and curriculum vitae.


1. Our governance indicators can be found in Appendix 1 to our methodology report (G.2 is an alternative to G.1)

2. As per relevant international human rights instruments (such as the International Covenant on Civil and Political Rights and the International Covenant on Economic, Social and Cultural Rights) and relevant Australian laws.

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