Blog: Financial Services and Markets Bill holds the key to ending UK … – Global Witness

Sir Ian
Cheshire stated in his letter that human rights should be considered in the due diligence conducted by
financial institutions.

It remains unclear to what extent Schedule 17 of the
Environment Act covers human rights compliance, as much of what will be
required from businesses is yet to be decided through secondary legislation. MPs
have questioned why
Defra has not yet completed the secondary regulations, over a year after the
Environment Act was agreed.

Global Witness recently gave expert
evidence in Parliament
, where we recommended the secondary
regulations make clear that “compliance with local land use and ownership laws”
– as stipulated in Schedule 17 – means that businesses must comply with a broad
category of human rights protections, including labour and environmental laws,
as well as respect for customary land rights.

The government’s counterarguments are wrong

The government claims more
corporate reporting
about business harms to nature will stop UK financial
institutions making deforestation deals in the future.

The UK is the largest
financial backer
of the Taskforce on Nature-related Financial Disclosure
(TNFD), a body developing a framework for financial institutions to report
their dependencies on nature. However, the GRI Taskforce has already said it
will not stop deforestation finance
and called for regulation instead.

In our briefing, Global Witness and others argued TNFD will not work to stop deforestation finance because:

  1. TNFD is not preventative, unlike due diligence.
  2. Reporting on deforestation finance is not the same as reducing it.
  3. TNFD mainly helps companies identify threats to their profitability, not harm to nature.
  4. Financial institutions keep the profits of deforestation under TNFD.
  5. The theory of change is wrong: a lack of data or awareness is not the problem.

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