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Big banks beware: there are now no excuses

Banks must take a zero tolerance approach to land grabs

By Shona Hawkes, Sustainable Food Advocacy Coordinator.

Australia’s big four banks need to ensure they don’t invest in companies that participate in land grabs and hurt local communities.

“I had documents from the local authority proving that I was the landowner …
 [so] I refused to accept [USD]$300 compensation for the land. The company then hired people who drove to my house, destroyed my house and then put my belongings in the car to take to the resettlement site … $300 is not enough. I just want adequate compensation to support my kids and my family. The company only gave me a 40 x 50 metre plot. Before I had 13 hectares — including land for a house, rice and other crops,” — Thida,  55, Kampong Speu, Cambodia.

People like Thida deserve to know who is seeking to profit from the agriculture and timber activities in their community, and that the companies involved in these activities will treat her and her community fairly. Our big four banks need to have clear commitments, transparency and accountability to uphold human rights and ensure that they don’t back companies that hurt local communities.

Sadly, this hasn’t been the case in Thida’s community. ANZ provided a loan for more than three years to a local company implicated in land grabs, forced evictions, child labour and food shortages.

Oxfam recently published a briefing paper titled, No Excuse: How Australia’s big four banks should better respond to land grabs. The report describes how the banks can construct an approach with zero tolerance for land grabs.

The report also discusses the role that transparency and accountability play in the realisation (or failure) of bank policies on human rights. It identifies specific ways that banks should increase their transparency, commitments and accountability relevant to land-related human rights (a less technical summary of our roadmap for reform can be found on pages 18–19).

Land grabs: bad for human rights, bad for business

The stakes are high. In 2014 Oxfam’s Banking on Shaky Ground report revealed that Australia’s big four commercial banks — the Australia and New Zealand Banking Group (ANZ), the Commonwealth Bank (CBA), National Australia Bank (NAB) and Westpac — were backing companies connected to land grabs in the agriculture and timber sector overseas.

As a result of losing their land, affected communities in countries like Cambodia and Brazil profiled in the report still face food shortages and poor housing, as well as violence and corruption. For those with a deep spiritual connection to land, the loss is unquantifiable.

The Banking on Shaky Ground report also outlined that land grabs are not just bad for human rights, but also bad for business: they expose the banks to a range of material and reputational risks. NAB and Westpac have since taken some positive first steps, while CBA and ANZ have failed to act. Yet, no bank has gone far enough.

Why do human rights policies fail?

The question “why do human rights policies fail?” was foremost in our minds as we started writing the No Excuse report. This led us to explore what we call the Responsibility Triangle: the inter-connected relationship between appropriate transparency, strong policy commitments and accountability. Without addressing all three areas, banks will fail on human rights.

The Responsibility Triangle crystalised our thinking on some basic principles when viewing the banks’ human rights policies from the perspective of grassroots communities.

For example, local people should be able to find out who is funding or seeking to profit from activities on their land and forests. Bank customers and investors should also know how the bank is using their money. But undue secrecy prevents communities from knowing if an Australian bank is involved.

In the rare case that local people can find a connection, bank policies do not include any concrete commitment to support redress. Making commitments without consequences for breaking them is a recipe for failure.

No justice for poor communities

Land grabs are also most likely to occur in countries with poor rule of law; this leaves communities with few, if any, options to pursue justice in the courts.

Banking on Shaky Ground showed that specific land-related commitments are needed, not general statements supporting human rights. This should include requiring the free, prior and informed consent (FPIC) of local and indigenous communities. For the banks, FPIC is also a useful due diligence and risk mitigation tool.

Our next step was to show what the banks can do. In doing so, we reveal the shortcomings of bank arguments against increasing their transparency, commitments and accountability on land-related human rights.

Are banks transparent enough?

Banks often dismiss the issue of transparency by appealing to a general principle of privacy. While Oxfam understands the importance of privacy in banking, we believe it is critical for banks to adopt greater transparency in dealings that are exposed to land-related risks due to the dire consequences of land grabs and human rights violations.

Privacy needs also differ across the diverse aspects of the banks’ business. For example, an asset management fund listing the companies that it invests in has no privacy risk. We also point to a range of existing examples of legally compliant, although ad hoc measures on disclosure: from one bank’s listing the companies its management funds invests in, to another’s naming the projects it finances. Greater transparency can be achieved by simply taking these ad hoc and piecemeal measures and systematising disclosure.

Progress from the big four banks

In November 2014, NAB put to bed the notion that banks should not, or could not, make land-specific commitments, by releasing a policy on improper land acquisitions. A week later Westpac committed to only lending to agribusiness and forestry companies that have the FPIC of local and indigenous communities.

In May 2015, Westpac extended this FPIC standard to all lending. We have called for NAB, CBA and ANZ to match Westpac’s commitment, or better, to apply FPIC group-wide. We also point out that FPIC commitments can only be fully realised with increased transparency and accountability.

The big Australian banks have committed to increased accountability under the United Nations Guiding Principles on Business and Human Rights (Ruggie Principles). The NGO BankTrack has articulated how the Ruggie Principles apply to banks such as having their own grievance mechanisms. Our paper calls for the banks to implement these existing commitments and take further steps.

The future responsibility of banks

We challenge the claim that it is only the banks’ clients, not the banks themselves, that bear responsibility for redress. Banks have a direct and proportional role in legitimising, enabling and seeking to profit from companies linked to land grabs. If a bank fails to do adequate due diligence to ensure that their clients or companies in which they invest are acting legally and ethically, the bank should be accountable for this.

Lastly, the report lists the measures that could comprise a zero tolerance on land grabs approach — showing that there is no excuse for the banks to fail to act on land grabs.

If you haven’t already, say no to land grabs now.

Say no to land grabs