On April 16th, French energy giant Total declared force majeure on its $20 billion gas project in Mozambique, suspending operations and withdrawing all staff. The cost of operations amidst the sharp increase in Islamic State-linked militant attacks, which led to the death of dozens of civilians and challenged the government to reassess its strategy against the insurgency, was too high a price to pay. Unfortunately, such interlinkages between conflict and business are commonplace.

Whether it’s corporate financing of the military junta in Myanmar, the solar industry’s work with rights-violating partners in China’s Xinjiang Uyghur Autonomous Region or tech companies indicted in French courts for selling surveillance technologies to repressive regimes in Libya and Egypt, the corporate world is waking up to a reality in which human rights saliency increasingly translates to financial materiality in countries impacted by conflict. As John Ruggie, the author of the United Nations Guiding Principles on Business and Human Rights (UNGPs) noted, “The message for businesses is that the cost of conflict is not only imposed on the victim; you are also imposing costs on yourselves. This is a lose-lose proposition that you can and should fix.”

Published ten years ago, the UNGPs call on businesses to conduct enhanced human rights due diligence (HRDD) to identify, prevent and mitigate these risks and treat them as a matter of legal compliance due to the heightened risks of gross rights abuses associated with operating in conflict-affected and high-risk areas (CAHRA). Enhanced HRDD is more important than ever, with the World Bank reporting that the number of people living in close proximity to conflict has more than doubled in the past decade and, if trends continue, two-thirds of the world’s poor will live in fragile and conflict-affected situations by the end of 2030.

Incentivizing more responsible business and investor practice in CAHRA is also a priority under the UN Working Group (UNWG) on Business and Human Rights’ UNGPs 10+ project to chart a course of action for the next decade. The UNWG recently reported on practical measures that states and businesses may take to “prevent and address business-related human rights abuse in conflict and post-conflict contexts.” However, institutional investors, a large and critical group of stakeholders, have yet to be included in this guidance. [1]

The increasing prominence of environmental, social, and governance (ESG) investing has prompted a growing number of investors to use the UNGPs to make both value- and valuation-based decisions and advance the corporate responsibility to respect human rights through company engagements. Focusing ever more attention on the “S,” investors are also recognizing and acting on the nexus between salient human rights risks and material risks for companies operating in CAHRA. This trend is reflected in investors prioritizing conflict risk, advancing conflict-related standards of material reporting, and demanding that companies assess human rights impacts in high-risk areas.

Currently however, there is limited practical guidance for ensuring their investments do not cause, contribute, or are linked to violations of human rights and the numerous laws, regulations, and voluntary commitments designed to protect vulnerable populations affected by conflict. The UNGPs offer a broad framework to address this gap and help develop more detailed guidance for investors. Heeding the UNGPs’ call for enhanced HRDD in conflict-affected areas, Heartland Initiative has developed the Rights Respecting Investment in CAHRA methodology. Designed to assist investors in protecting the rights of vulnerable populations while simultaneously addressing the material risks faced by companies, Heartland’s methodology enables them to identify and assess the severity of a company’s risks based on its geographical, relational, and/or operational proximity to the violation, violator, and victim. [2]

This approach avoids focusing on a single issue, geography, or controversy in favor of a process that considers the interrelated risk variables of a company’s operational contexts, value chain partners, and business activities. What results is a more comprehensive human rights and material risk profile of the engaged company, encompassing a higher percentage of its global revenue and operations and a wider spectrum of at-risk rights-holders and countries. Applying this strategy in investor-led engagements incentivizes increased participation by companies who recognize a broader array of their material risks, by civil society organizations concerned about the rights of vulnerable populations, and by like-minded investors focused on risks to both people and their portfolios.

The recent military coup and ensuing violent crackdown against protesters in Myanmar, which followed a sustained ethnic cleansing campaign against the Rohingya community, gave renewed urgency to the enhanced HRDD mandate of the UNGPs, prompting Surya Deva, Vice Chair of the UNWG to state, “Because the risk of gross human rights violations has greatly increased in Myanmar, action by States and human rights due diligence by business, and investors, should be rapidly and proportionately heightened.”

The ten year anniversary of the UNGPs comes at a time when investors are increasingly answering this clarion call, prioritizing human rights risks in conflict-affected areas like Myanmar, encouraging companies to prevent and mitigate human rights risks in these areas, and making rights-respecting decisions concerning their own portfolios.

Sam Jones & Richard Stazinski, Founders, Heartland Initiative, and members of the Investor Alliance for Human Rights

[1] The UNGPs 10+ project is carrying out targeted research on institutional investment and will launch a stocktaking report on 17 June, which posits the need for increased action in this area.

[2] Heartland’s proximity-based model is informed by Salil Tripathi’s work for the Institute for Human Rights and Business as described in Business in Armed Conflict Zones.