Ryan Brightwell of BankTrack argues that people have the right to know who is financing companies that commit human and environmental rights abuses
“Many thanks for your letter. As you will understand, we are unable to comment on our involvement or non-involvement in specific projects for reasons of client confidentiality.”
It was 2016 and we at BankTrack, which campaigns to hold commercial banks accountable, had written to 15 large international banks involved in financing a palm oil conglomerate, IOI Corporation, accused of severe labour standards violations in Malaysia. And here was another response from a bank refusing to talk about its client, or even confirm the millions of dollars in loans we knew it had provided.
This was hardly a surprise. Banks have been writing to campaigners and affected people with apologetic words about “client confidentiality”, bringing the shutters down on any chance of dialogue or accountability, for as long as they have been financing environmentally destructive projects and companies.
We had hoped that perhaps, by highlighting that banks, like all business enterprises, now had a UN-mandated responsibility to respect human rights and to “know and show” how they do so, they might be more forthcoming. But while all but one bank responded, half of them would not even acknowledge their financial links with IOI.
Why would half of banks be prepared to talk, yet the other half say they were 'unable'
But why would half of banks be prepared to talk, yet the other half say they were “unable” even implying this would be illegal? This happened even though the banks were often based in the same countries, and subject to the same laws; even though the most secretive banks at the same time padded out their sustainability reports with details of loans to support wind farms and social projects. Were these loans not also confidential?
We knew the banks had links to IOI Corporation mainly through accessing expensive subscription databases provided by companies like Thomson Reuters and Bloomberg. Oxfam Australia had already looked into where this data came from after receiving similar letters from Australian banks involved in financing land grabs. They were told it often came from banks themselves. So this “confidential” information was already being shared with anyone who was able to pay, including the banks’ own competitors? Oxfam hit the nail on the head, calling client confidentiality a farce.
This week BankTrack publishes analysis of five years of correspondence with 31 major international banks regarding problematic projects they finance.
It finds that in nearly half of all responses (70 of 150), banks said they could not comment on whether they had a relationship with a particular customer or project. Half of those responses cited client confidentiality as the reason.
Some banks were routinely hiding behind client confidentiality – for example, HSBC accounted for 11 of the 70 responses. This doesn’t make HSBC the worst, since other banks sent no response at all. And a new policy from HSBC requires all new palm oil clients to consent to disclosure, something that points to possible progress, although it has not yet resulted in improved disclosure. Elsewhere, for example in France, large banks are clearly putting effort into securing their client’s consent so they can comment when asked.
People have the right to know who is financing companies that commit human and environmental rights abuses
We also reviewed the legal requirements in major banking centres around the world. We found that in most cases, client confidentiality clauses are simply written into bank contracts, meaning they can be just as simply written out. Wherever banks are required to keep client relationships confidential by statute, there are clear exceptions where clients consent. This is how banks like the Dutch Triodos and the Italian Banca Etica are able to publish complete lists of their business customers, so their personal clients know exactly where their money is going.
We believe that people have the right to know who is financing companies that commit human and environmental rights abuses – from large dams that displace indigenous peoples to companies that use child labour in their supply chains. Victims cannot engage with the banks behind such projects if they will not even confirm whether they are financially involved. And greater transparency can have several benefits for banks, not least helping them build trust and show how they are working towards meeting their responsibilities to manage the impacts of their finance.
Our research has shown that when banks say they are “unable to comment” on specific customers, they are making a choice. We found nothing to stop them from writing the right to disclose into their loan agreements, and refusing to finance businesses that insist on secret loans. We are calling on banks to make this change, and start publishing details of their finance, beginning with loans to high-risk sectors like infrastructure, energy, mining, oil and gas, forestry and agribusiness.
Transparent lending is essential if banks are to be accountable for the impacts of their finance, and only commitment from banks, or, failing that, compulsion from regulators, is needed to get us there.
Ryan Brightwell is researcher and editor at BankTrack, an NGO based in the Netherlands.
IOI Corporation palm oil. HSBC ESG UN Guiding Principles