Abstract
Under the 2011 UN Guiding Principles on Business and Human Rights (UNGPs), banks, like all businesses, have a responsibility to respect human rights and to carry out human rights due diligence. Although climate due diligence is not explicitly included in the UNGPs, tackling an enterprise’s direct and indirect climate change impacts is arguably a dimension of the corporate responsibility to respect human rights and should form part of the human rights due diligence process. At present, it is unclear how such responsibility applies to banks, whose contribution to climate change is mostly indirect. This article addresses the research question: how should the law be interpreted to form a coherent climate due diligence standard for banks? To address it, the article first maps out the climate responsibility of banks under international soft law standards and assesses privately developed guidance. It then elucidates the emerging concept of climate due diligence, reading climate change responsibilities into the now well-established corporate responsibility to respect human rights as authoritatively elaborated in the UNGPs. Finally, it explains how such normative standard applies to banks and unpacks the key elements that a bank’s climate due diligence process should include.
Highlights
Further research could explore the relationship between the climate due diligence standard we propose in this article and existing other instruments, but here the focus is on understanding the climate dimension of the corporate responsibility to respect human rights as it applies to banks
This article has provided a conceptualization of the climate change responsibilities of banks under the UNGPs
The widely-accepted human rights due diligence standard elaborated by the UNGPs, interpreted in the light of relevant standards of international environmental law and climate law, provides the strongest normative basis and the clearest definition to the principle of climate due diligence, presented in Section 4 of this article
Summary
Banks are key actors in the necessary energy transition and can significantly contribute to achieving the Sustainable Development Goals and the Paris Agreement’s objectives. We argue that the corporate responsibility to respect human rights under the UNGPs requires corporations, including banks, to assess and address their direct and indirect contribution to climate change, one of the biggest human rights threats of our time. In a report published in 2015, the UN Environmental Programme (UNEP) presents the human rights implications of climate change They explain how the Fifth Assessment Report of the Intergovernmental Panel on Climate Change (IPCC) ‘provides a detailed picture of how Sustainability 2021, 13, 8391. Under the UNGPs, bear a responsibility to respect human rights, and that climate change is a major global human rights threat, this paper argues that companies are expected to address their direct and indirect impacts on the climate by conducting appropriate climate due diligence. While this paper focusses on banks for simplicity, many of its conclusions apply to other actors in the financial sector, for instance sovereign wealth funds or other investors holding shares in companies that contribute to climate change
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