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Insights from Futureye’s Fixing Finance by Saving Human Rights Roundtable
April 09 2018
By Hugo Hodge and Zach Green
When a culture is so deeply ingrained and the individuals and organisations who preside over it are inconceivably powerful and have little incentive to change, bringing about any meaningful transformation can seem impossible.
Attendees with diverse backgrounds, including human rights and banking, heard from David how finance has “helped liberate individuals and peoples alike by providing them with greater independence, freedom, security, and self-respect”.
But as with many relationships, “such intimacy can bring great pain as well as pleasure, and yet neither can live without the other”. Finance is often at the centre of many human rights abuses while also “at times enabling their salvation”.
David showed how finance has improved living standards, education, and health outcomes across the world but growing wealth inequality, inefficient allocation of capital, tax evasion, secrecy, and theft were turning the relationship increasingly sour.
Can it really be changed?
In the room it was clear, the human rights and finance relationship is presently in dire need of repair. One attendee, playing the devil’s advocate, said the stereotype of the greedy banker couldn’t be changed, their wilful ignorance and lack of due diligence is too deep-rooted.
Everyone could agree that the system needs to be restructured in ways to expand the benefits finance can bring while reducing the harms it causes. But to actually get the finance sector to change, there has to be an incentive equal to or greater than the fiduciary duty of returning a profit to stakeholders. Marketplaces are social constructs, not natural laws. This means society can control them.
Missing from the equation
A general consensus around the room, including those with human rights backgrounds, was that guiding principles disseminated from international NGOs were ineffective in driving change.
The current attitude is that it is not the banker’s business to examine the human rights records of third tier companies in the supply chains of business they loan to. Their responsibility lies in measuring and quantifying risk. How can human rights abuses fit into this equation?
A force for good
Ethical investing was one answer discussed. There is a clear appetite for money to do good, and the growth in this sector has exploded, creating financial incentive for all companies to improve their ethics and sustainability practices and guidelines.
The peak body for the sector, the Responsible Investment of Australia, estimates there is more than $2.96 trillion invested in ethical strategies around the globe. Further, recent studies have proven beyond doubt that ethical funds outperform the market.
Societal awareness of the finance sector’s poor practices has risen, and as a result there is demand for stricter regulation. It is no longer seen as fair that financiers can reap the benefits if that comes at the cost of human rights.
This can be seen in the recent trend of ethical investing – though perhaps trend is the wrong word. It is more akin to a movement, a shift in societal values. A shift from short-term sales driving share prices, from ignoring the social issues that arise as a result of this ‘short-termism’ toward a market driven belief that money and companies can and should benefit society beyond the profit motive and the use of profit as a measure of social value.
Laurence Fink, the CEO of Black Rock (a company with $6 trillion in assets representing eight percent of the New York Stock Exchange) summed it up perfectly when he said society is demanding public and private companies should serve a social purpose.
“To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society.”