With the recent global financial crisis, the issue of ethical investment has become central. For over a decade, a growing number of investors have included non-financial concerns, or so called ESG criteria (Environment, Social and Governance), in their decisions to invest or divest from companies. Few of them however have applied non-financial criteria to states. The current study sets the basic elements to feed the discussion on states’ extra-financial evaluation, based on a methodology which puts states’ respect, protection and promotion of human rights at the heart of the analysis. This methodology is implemented within FIDH’s own ethical fund, Libertés et Solidarité.
Giving « non-financial » criteria the place it deserves at the heart of discussions
On the basis of which criteria should investment decisions in bonds be made? The financial crisis in Greece is a blatant example of the failure to predict financial stability when solely taking into account financial criteria. Not only the consideration of financial criteria alone limits the analysis to the short term perspective, but it can also cause severe and costly social and environmental consequences to all, in particular to vulnerable populations. With this study, FIDH proposes a tool for actors such as non-financial rating agencies, aimed at contributing to the development of rating systems allowing Funds managers, which prioritise investing in countries actively supporting, respecting and promoting human rights.
Whilst the eyes of economists, financial analysts and financial rating agencies are now turned towards states’ internal governance structure and the management of their debt payment, FIDH warns the international community about the necessity to incorporate human rights concerns in their financial analysis. FIDH, which approach is entrenched in international law, recalls the necessity and urgency to put the well-being of all at the centre of economic decision-making.