»Dreckige Profite«

Summary

This report addresses proven and postulated violations of human and environmental rights by multinational corporations and discloses the financial institutions (FIs) which benefit from these activities.

Dirty Profits summarizes cases of companies which are heavily criticised for their poor environmental, social, and/or governance performance by stakeholders such as courts, politicians, regulators, NGOs, local communities, and the media. Often these cases concern proven and postulated breaches of national and international laws, conventions, and regulations associated with environmental damage, climate change, human and labour rights, community rights, corruption, and arms.

Companies accused of committing human rights abuses and environmental damages have been trying for decades to address social issues through CSR (Corporate Social Responsibility) programmes. These – mostly selective and voluntary approaches – ignore the fact that a serious approach requires the collective consideration of all human rights issues, not just a select few that companies feel comfortable with. A comprehensive human rights approach must focus on the people’s needs in relation to a company’s social and environmental impact.

Every company in every industrial sector, particularly the resource extracting and arms producing industries, impacts human rights and therefore has responsibilities. This report demonstrates that companies often leave a negative impact on a range of human rights issues, such as discrimination, health & safety, freedom of association, privacy, poverty, subsistence, education, and housing. Also, corruption is becoming a considerable problem undermining the world’s social, economic, and environmental development. Abuse of state power, exclusion, environmental pollution, and the (illegal) arms trade are widely recognised as leading causes of poverty. Thus, respecting human rights is crucial for the long-term sustainability of development, especially in light of rapidly growing resource-based industries.

In this network, investors along with public and private banking sectors play an incremental role in every division of human and business activity. With their investment decisions, this syndicate fosters certain business choices and hampers others. It is essential to strive to eradicate global poverty and secure human rights and use financial resources according to ethical and sustainable investment criteria – especially in Sub-Saharan countries.

However, there is still a lack of adequate and effective investment policies which address vital sectors and critical issues at FIs. Binding legislation to regulate financial flow is also absent, mainly in the spheres of human and labour rights, environmental standards, and anti-corruption. This gap results in unsustainable business practices and contributes to human rights violations and environmental destruction in under-developed and low-income countries.

As a result of the recent financial market crisis, FIs are increasingly turning to the resource extracting and mining industries for investment. Many private and institutional investors view commodity equity funds as an opportunity to reap high profits from this industry sector. Investments in commodities prosper because they form the basis of economic activity in western society. Industrialized countries especially depend on the constant availability of a wide range of raw materials. Experts state that in most cases it is unlikely that the local population benefits even marginally from the profits of resource extraction. Furthermore, profits are often veiled in tax havens and thus remain untaxed. Investors should look for investment opportunities that focus on the sustainable extraction and efficient use of resources.

The arms industry has become all the more attractive for investors over the years because of its significant increase in turnovers and exports. According to data on international arms transfers by Stockholm International Peace Research Institute (SIPRI), the volume of worldwide arms transfers was 24 percent higher from 2007– 2011 than it was from 2002–2006. Likewise, the total value of German weapons exports increased in 2011 by 13.9 percent to a total of around €5.41 billion compared to the previous year. Thus, this report focuses on both the resource extracting and the arms producing industries. The irresponsible export of arms has and will lead to: (1) violations of human rights and international humanitarian law, (2) inter- and intranational conflicts, and (3) political instability, insecurity and reduced economic growth. Additionally, they support unaccountable purchasing practices, corruption, and the diversion of public assets. The US Department of Commerce estimates that the arms trade accounts for approximately 50 percent of all global corrupt transactions.

In 2011, companies* documented in this report earned combined revenues of at least €1.22 trillion and achieved net profits of more than €106 billion. While a significant amount was involved, it is impossible to specifically relate these numbers to human rights violations and environmental damage.

The financial institutions** which directly support and thus benefit most from business activities resulting in proven and postulated violations of human rights and environmental damage include the French BNP Paribas, the German Allianz and Deutsche Bank, the Dutch ING, and UniCredit from Italy. Since early 2010, the financial transactions between the 16 financial institutions** and 28 companies* investigated in this report amount to more than €44 billion including loans (more than €16 billion), underwritings of shares and bonds (more than €10 billion) and managed shares and bonds (less than €18 billion).

Unfortunately, the current world-wide financial crisis has made it impossible to judge harmful investments from the “old” or “real” economic perspective. Through speculative investments and non-transparent financial products, financial institutions and investors endanger MDGs, create poverty, violate rights, and put the world’s financial system at risk. This report also documents the harmful business practices of the investment banks Goldman Sachs (USA) and Deutsche Bank (Germany) and their role in the formulation of a crisis-ridden financial sector.

This report highlights the need for binding regulation to better address environmental and human rights issues. In order to combat human rights and environmental violations,

regulators have to strengthen control, inspection criteria, and sanctions for financial institutions. In order to regain credibility, financial institutions must develop and implement concrete and binding commitments to sustainability, transparency, clearly defined minimum standards, and exclusion criteria for their financial services.

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