Integrating a human rights-based approach in European development finance institutions
Cecilia D'Alessandro, Karim Karaki and San Bilal look at the human rights-based approaches of development finance institutions and discuss good practices and challenges with their operationalisation. They argue that the EU is well placed to take a leading role in this endeavour, building on the EU regulatory and institutional value-based setting.
International financial institutions (IFIs) and development finance institutions (DFIs) play a key role in promoting sustainable and inclusive development in developing countries. In doing so, they operate in challenging contexts, often involving significant sustainability risks. To address these risks and foster their development impacts, DFIs have put in place policies and procedures to ensure that investments do not harm people or the environment. They also show a growing commitment to embrace a human rights-based approach (HRBA) to their investments. Yet, regarding adopting the HRBA, progress is uneven across DFIs, including in Europe. This partly reflects the diversity of DFIs in size, strategies and capacities.
This paper sets out to better understand human rights-based approaches, highlight good practices among DFIs and discuss some of the challenges linked to their operationalisation. The paper concludes by presenting ten recommendations for European DFIs to strengthen their approach to human rights, clustered into five main areas: (1) policy commitment and mandate; (2) management of negative impacts; (3) human rights promotion; (4) integration of HRBA principles and toolboxes in DFIs’ operations; (5) the case of co-financing.
The paper also argues that the EU is well placed to take a leading role in this endeavour, building on the EU regulatory and institutional value-based setting. The European Development Finance Institutions Association (EDFI), together with the European Commission blended finance and guarantee mechanisms, can play a catalytic role in enhancing DFIs’ HRBA in a coherent and collaborative way.