UK: Finance sector profiting from poverty, environmental damage and human rights abuses, say UK charities
This report has been compiled in response to the UK governmentâ€™s failure to exercise leadership to ensure that the finance sector does not continue to undermine global policy objectives in areas ranging from climate change to corruption to the Millennium Development Goals.
The publication of the report coincides with a major European conference opening in London today hosted by the UK Presidency of the EU, "Investing in the Future: a European conference on CSR and the finance sectorâ€. The report also comes in the same week as Gordon Brownâ€™s much criticised decision to abandon new corporate reporting rules, known as the OFR (the Operating & Financial Review), a step that has been widely condemned by the investment community, trade unions, think tanks and pressure groups.
The OFR was the first step towards improving transparency on social and environmental impacts, and its abandonment constitutes the discarding of the only concrete measure this Government has taken to improve corporate accountability.
The ground-breaking report, â€˜A Big Deal? Corporate Social Responsibility and the Finance Sector in Europeâ€™, accuses European banks and financial institutions of benefiting from corruption, profiting from poverty and social exclusion, as well as contributing to human rights abuses and environmental degradation, and includes case study examples of all of these.
The report includes alternative proposals that are more likely to deliver greater accountability and lasting sustainable development.
In spite of the overwhelming evidence to the contrary, the agenda for the UKâ€™s EU Presidency CSR Conference assumes that the industryâ€™s largely ineffectual attempts at self-regulation are working. Yet initiatives such as the Equator Principles or the UN Global Compact have failed to achieve progress in the sector as a whole.
â€˜A Big Deal?â€™ presents six case studies which clearly demonstrate the finance sectorâ€™s inability to embed corporate responsibility on a voluntary basis. The report finds that the finance sector:
- Provides a haven to siphon off much-needed tax revenues from cash-strapped developing countries, only benefiting a wealthy minority who avoid paying tax altogether.
- Has abjectly failed to factor in the financial risks of climate change, which may ultimately lead to a global economic breakdown as the costs of climate change begin to outstrip increases in global GDP.
- Is a primary conduit for bribery and corruption, providing billions of dollars in loans to repressive governments. European filters of finance, such as the UKâ€™s Export Credit Guarantees Department have failed to prevent bribery and corruption on a massive scale.
- Perpetuates poverty and social exclusion in Europe, by providing unscrupulous levels of debt at high rates to those least able to afford it, all the while bringing in record-level profits.
- Regularly puts a price tag on human rights, financing projects which pose a threat to the implementation of human rights laws in developing countries, while breaching the sectorâ€™s own guidelines in the process.
According to Deborah Doane, Chair of the UK Corporate Responsibility Coalition:
â€œAll the UK Government is doing is showcasing the finance sectorâ€™s current array of international CSR initiatives that have proved incapable of preventing the serious problems and abuses that they purport to addressâ€.
Moves to make financial institutions more directly accountable for their actions will go a significant way to enabling the finance sector to contribute to sustainable development targets, rather than undermine them.
As Doane points out,â€œIt is not just a few pressure groups that are demanding greater accountability of the finance sector, but increasingly also investor associations and consumer bodies.â€
Background and Notes
The Euro zone is now the second largest economy in the world after the US, with $8.2 trillion in GDP in 2003. Europeâ€™s finance sector is part of a massive global industry which now controls a staggering $118 trillion.
As such, the sectorâ€™s influence has enormous consequences for efforts to achieve sustainable development both in Europe and elsewhere.
(1) Action Aid, Amnesty International, CAFOD, Christian Aid, The Corner House, Friends of the Earth, Global Witness, New Economics Foundation, Tax Justice Network, WWF