GENEVA, April 25 (KUNA) -- UN human rights experts have on Thursday welcomed a new EU regulation to drive sustainable investment, saying it is an important step to leverage the financial market's role in driving responsible business conduct.
The UN experts are the members of the UN Working Group on human rights and transnational corporations and other business enterprises, Juan Pablo Bohoslavsky, Independent Expert on foreign debt and human rights; David Boyd, Special Rapporteur on human rights and the environment.
The new regulation, which covers a range of financial sector actors such as investment and pension funds, insurers, investment managers and financial advisors, introduces due diligence requirements to take into account risks to people and planet (the so-called environmental, social and governance risks) in investment decisions, said the experts in a common press release.
Seeking to promote responsible investment and transparency, the regulation requires financial market participants to disclose the steps they take to identify and address such risks.
"Business activities and the investments driving them can make significant positive contributions to sustainable development," said Surya Deva, Chairperson of the UN Working Group on Business and Human Rights. "However, if human rights are not upheld in such activities, the positive contributions will be undermined.
"Human rights due diligence to prevent and address adverse impacts on human rights is the most significant contribution most businesses and investors can make towards the people part of sustainable development. Human rights due diligence processes are also of particular importance in the sector in order to contribute to preventing tax evasion and tax avoidance," they further stressed.
This regulation would address a market failure that the Working Group identified in a 2018 report, namely the lack of systematic and effective mechanisms for investors, public agencies interacting with the private sector and regulators to reward good practices for addressing adverse impacts on people.
The experts called on EU Member States to move fast to implement the regulation. They also urged the EU and EU Member States to develop practical implementation guidance for financial sector regulators and financial market participants that are based on corporate human rights due diligence set out in the UN Guiding Principles on Business and Human Rights and the OECD Due Diligence Guidance for Responsible Business Conduct.
"Effective regulation can help reinforce emerging good practices, plug gaps and create a level playing field. We also hope that the implementation of the regulation will advance the understanding among investors that the purpose of human rights risks management is to prevent and address risks to people - not risks to the investment," said Deva. (end)