Environmental, Social & Governance (“ESG”) has become an important part of business decisions, corporate finance, and business strategies over the last few years. The influence of ESG in business practices is becoming ever-more prevalent and the importance of considering each element of E-S-G is becoming increasingly clear. Over the coming years, national and international legislation is set to include more ESG-related aspects which means that there will be increased scrutiny placed on the ESG practices of firms.
The 'S' in ESG covers multiple factors, including human rights, modern slavery, diversity, employee relations, supply chain sustainability, consumer relations and personal data protection. The scope of human rights which are covered by the 'S' of ESG is quite broad and for example includes the United Nations (“UN”) 1948 Universal Declaration of Human Rights and the nine UN treaties. With regard to respecting human rights, the UN Guiding Principles on Business and Human Rights are the most important source.
It is therefore surprising that this week HSBC was found to be complicit in human rights violations.
A report by the All-Party Parliamentary Group (“APPG”) on Hong Kong took issue with the fact that a number of banks, including HSBC, denied pension pay-outs to those who fled the authoritarian crackdown.
Over 88,000 people have left Hong Kong since 2021 and have been granted residency under the British National Overseas (“BNO”) visa scheme, after Beijing’s security crackdown intended to suppress pro- democracy protests in 2020. The Hong Kong government has subsequently refused to recognise BNO visas as valid identification, including pension scheme authorities that govern how money can be withdrawn. The APPG indicated that this move contravened the UN Guiding Principles which state that “everyone has the right to leave any country including his own”.
The inquiry concluded that HSBC’s decision to follow the directive has not only left Hong Kong residents unable to create new and safe lives for themselves in the UK, but also means the bank is complicit in human rights abuses. HSBC said it followed the pension scheme regulators’ rules when members attempted to withdraw their pensions early.
The report adds further pressure to HSBC, which previously has been widely criticised by western politicians for appearing to side with Chinese officials. The bank’s leadership has repeatedly refused to be drawn on questions over its political position on the matter. The inquiry however has placed significant responsibility on HSBC to reform its processes in order to adhere to international human rights standards and ensure adherence to their social responsibilities.