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5 Oct 2021

BankTrack & OECD Watch

Nominee shareholdings: UN Human Rights office confirms banks’ human rights responsibilities

The UN’s Office of the High Commissioner for Human Rights (OHCHR) has confirmed that banks do have responsibilities when it comes to the impacts of companies in which they hold shares on behalf of clients. Banks have often argued that they have little or no responsibility where the bank’s client is the “beneficial owner” of the shares, although the bank typically arranges the share purchase, is publicly listed as the owner of the shares and often allows its client to invest in the company anonymously.

The advice, which did not refer to any specific banks or investments, was requested by BankTrack and OECD Watch following a decision by the Swiss National Contact Point (NCP). The NCP decided to accept only part of a complaint filed by the Society for Threatened Peoples (STP) against Swiss bank UBS regarding its business relationship with Hikvision... The NCP determined in its initial assessment that “in relation to UBS’s role as custodian for Hikvision shares on behalf of clients … no business relationship between UBS and Hikvision exists.” In a response to the NCP’s assessment, BankTrack and OECD Watch described the decision as “deeply problematic”...

... OHCHR stated that “purchasing and holding shares of an investee company constitutes a ‘business relationship’ between an FI and an investee company under the Guiding Principles” and it “appears to be no less the case that purchasing and holding shares in an investee company constitutes a linkage between the FI’s ‘operation, product or service’ and the investee company when the FI does so at the request and on behalf of a client.” ... OHCHR explained that the UNGPs only require “that there is a direct link between service and the investee company” and this “direct link is created by the fact that the service entails holding and trading shares in the investee.” ... OHCHR [also] stated that bank policies setting out “how the FI embeds human rights criteria across its activities, products, and services” should “include services such as nominee shareholding.”