Are financial institutions reliable accelerators of labor and human rights compliant practices in Asia's agriculture sector?
13:00 - 14:30 (Bangkok time, GMT+7), 31 May 2021
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Despite the challenges brought about by the COVID-19 pandemic, agriculture remains a key driver of economic stability and food security in Southeast Asia. Over the past decade, governments across Southeast Asia welcomed both local and foreign agribusiness companies to set up their operations in their countries, and today the food and agriculture sectors is among the most critical for ASEAN economies, with the sector accounting for 12% of the overall regional ASEAN GDP. The region is a leading exporter of crops such as palm oil, rubber, coconut, and rice as highlighted by the Grow Asia report. However, the sector is often mired with challenges, given its heavy reliance on complex value chains that are strongly linked with the region’s marginalized communities, particularly women, landless farmers, and smallholders. These challenges represent significant reputational and financial risk to agribusinesses, which are able to incentivize more responsible approaches to labor and human rights compliant practices. However, such incentives can be more easily scaled up for greater impact with the support of financial institutions and investors that can use critical financial tools and leverage at their disposal to accelerate positive change in the sector.
The 2020 Fair Finance Asia (FFA) and Oxfam (GRAISEA) study, Understanding financial flows to agriculture - Towards inclusive and responsible investments in the ASEAN region, revealed that USD 45 billion in loans and underwriting services, and USD 13.9 billion in investments through shares and bonds were provided to some of the biggest agriculture companies operating in the ASEAN region between 2014-19. Such significant amount of capital, gives financial institutions an opportunity to influence the sector positively, for example, by setting clear zero tolerance policies for companies that are not compliant, or by conditioning their lending to ensure the businesses they finance develop clear strategies to align their practices with internal labor and human rights standards encapsulated by the Fair Finance Guide International (FFGI) Methodology.
The UN Guiding Principles on Business and Human Rights (“the Guiding Principles”) requires that business enterprises: (a) avoid causing or contributing to adverse human rights impacts through their own activities and address such impacts when they occur; and (b) seek to prevent or mitigate adverse human rights impacts that are directly linked to their operations, products or services by their business relationships, even if they have not contributed to those impacts. The Guiding Principles is one of the international conventions referenced by the FFGI methodology which is used by FFA national coalitions to assess the policies of local banks. Based on the most recent scores, of 44 banks assessed across seven FFA countries1, it is clear that most Asian Banks still do not have existing policies on human rights which unfortunately resonates with the widely challenged 2017 discussion paper by the Thun Group of banks2, stating the assumption that a bank would generally not be considered to be causing or contributing to adverse human rights impacts arising from its clients' operations.
While the UN Guiding Principles apply to all enterprises regardless of sector, including banks, the extent to which the banks should be held accountable remains unclear for many stakeholders. In ASEAN, the Ministers of Agriculture and Forestry adopted a set of regional Guidelines on Promoting Responsible Investment in Food, Agriculture and Forestry which aim to both 1) identify 10 key environmental, social and governance practices that are considered responsible investments in ASEAN and 2) provide guidance for policymakers, agribusinesses, financial institutions and local communities on how to ensure these practices are fulfilled. These Guidelines offer financial institutions a framework to guide their own behaviors toward human rights and labor practices, and prepare for policy changes which are aligned to the Guidelines. ASEAN Member States aim to increase responsible investments and enable the promotion of labor and human rights compliant practices in the region through the adoption and uptake of the Guidelines by policymakers, providing clear guidance to banks and other financial investors. Grow Asia is currently leading the work to implement these Guidelines with policymakers, agribusinesses, and financial investors across ASEAN.
1 Cambodia, India, Indonesia, Japan, Philippines, Thailand, and Vietnam
2 Paper on the implications on UNGPs (Discussion Paper); https://media.businesshumanrights.org/media/documents/files/documents/2017_12_Thun_Group_of_Banks_Paper_UNGPs_13b_and_17.pdf (as seen on May 17, 2021)
The session organizers fully agree and recognize that all stakeholders and actors have important roles to play in accelerating the adoption of labor and human rights compliant practices across ASEAN’s agricultural sector. Through this session, the organizers seek to specifically underscore the key role of the financial sector, both private and public sector actors, in influencing positive change.
To do so, the session is designed to follow a debate style exploration which will highlight the key arguments for and against the role of financial institutions and regulators as agents of change. Differing viewpoints will be showcased in the form of an evidence-based dialogue on the role and liabilities of financial institutions and regulators in promoting labor and human rights compliant practices in Asia's agriculture sector.
Presenters will be divided into two groups, one to highlight the key initiatives being led by financial institutions for greater labor and human rights compliance, and the other to argue that meaningful change can only come to fruition if financial regulators take a stronger reign over the sector.
Chatham house rules will be applied during the session, and if permitted by the UNBHR organizers, recording of the session will not be done.
1. Establish the significant role and influence played by financial institutions and regulators in promoting labor and human rights compliant practices in Asia's agriculture sector; and
2. Inform public opinion and encourage better consolidation of the work being done under the UNPRBs, for example, in holding the Asian financial sector accountable for the labor and human rights practices of businesses.
1. What role do financial institutions play in promoting labor and human rights compliant practices in Asia's agriculture sector?
2. How can agribusiness companies promote and enable FIs to promote labor and human rights compliant practices in Asia's agriculture sector?
3. What are the key activities related to human rights compliance that FIs find difficult to ensure implementation by agribusiness companies in Asia?
4. What role do civil society organizations and regulators play in working with FIs and the private sector to support more responsible practices?
5. Given the role of the ASEAN Secretariat and national governments in promoting ASEAN RAI in the region, what role should each of the stakeholder group(s) play?