LSE - Laboratory for Advanced Research on the Global Economy - Investment & Human Rights Project

Investment is a major driver of the global economy. Foreign direct investment and foreign portfolio Investment alone totalled $1.35 trillion and $776 billion respectively in 2012. Moreover around 100,000 business enterprises operate globally controlling over 900,000 foreign affiliates.

Investment can have both positive and negative impacts on the lives of people. Positive impacts can include, for example, employment opportunities, training, improved technological know-how, the introduction of clean technologies and revenue generation, which can help States to provide and maintain public services. Negative impacts can include, for example, damage to existing livelihoods, physical or economical displacement without either proper consultation or remediation, environmental degradation that reduces food and water sources, and damage to culturally significant locations or resources.

The Investment & Human Rights Map has been designed to help improve understanding of how investment happens – how it is designed, financed, regulated and protected – and to explore how each of these areas may directly or indirectly connect to both positive and negative impacts on people’s lives. By increasing our understanding of these connections, we can better identify the source of negative impacts, meaningful leverage points to achieve positive change and ways to increase the benefits of investment.

There are a number of ways to define ‘investment’. The Learning Hub uses ‘investment’ to frame its work, which explores (i) the complex set of relationships that underlies cross-border economic activity, and (ii) the legal and financial structures, rules and dynamics that facilitate, support and protect this activity. The Learning Hub’s work will therefore relate to foreign direct investment, foreign portfolio investment and even some forms of trade.

The Learning Hub is building the Investment & Human Rights Map initially with the following investment-related activities:

Designing investment strategies: To enter new geographies and grow their business activity internationally, business enterprises design investment strategies that include determining what markets to enter, in what form to enter and eventually how might they may exit. These strategies include decisions at different levels including commercial, operational, managerial and marketing. They also include decisions as to the legal and financial structures that allow and facilitate the business venture.

Financing investment: Business enterprises can either self-finance investments or they can seek money to fund their investment ventures in capital markets and obtain capital through equity investments, bonds, loans and other financial arrangements. State-supported and private entities may also provide guarantees and insurance to businesses, which in turn facilitate or support financing arrangements.

Regulating investment: States adopt and implement domestic policies, laws and regulations that determine how investment will be promoted, supported, facilitated and protected. States also enter into contractual arrangements with investors (State-investor contracts) and sign regional and international treaties (international investment agreements or ‘IIAs’) to promote and protect investment. States also act in the context of regional and multilateral organisations to produce guides, standards and procedures relevant to investment, including for the resolution of investment disputes.

Resolving investment disputes: During the life cycle of investment, when disagreements arise between business partners or between investors and the host State, there are a number of ways disputes can be handled. Domestic laws, contracts and IIAs will determine the availability of dispute resolution mechanisms and even the relevant procedural rules. Some of the possible mechanisms include domestic courts, mediation, arbitration or other less formal procedures.

The foundational idea underlying human rights is that people have a right to live a life of dignity whatever their nationality, place of residence, sex, colour, religion, language, national or ethnic origin, or any other status. Human rights therefore relate as much to accessing essential food, water and shelter for life as they do to accessing education, healthy working conditions and freedom from torture and slavery. Human rights are firmly grounded in international law, and the rights States have recognised in international agreements provide an authoritative reference point for identifying the conditions necessary for human well-being.

Where do human rights fit on the Investment & Human Rights Map? The Learning Hub has placed human rights at the centre of the map because we are inviting government and commercial practitioners to consider how investment-related activities can connect to people’s lives and well-being. At the same time we are inviting human rights experts, civil society and others to integrate investment-related rules, structures and activities in their consideration of how to improve the enjoyment of human rights worldwide.

The United Nations Guiding Principles on Business and Human Rights (‘UNGPs’) provide a useful starting point for drawing connections between investment activities and human rights. They provide an authoritative policy framework that clarifies State duties and business enterprise responsibilities regarding human rights in the context of business activities. Importantly, they point to investment as one area where implementation of the Principles is key, and they help frame practical questions in this area.

The UNGPs challenge business enterprises to think about how well their strategic investment decisions are aligned with the enterprise’s responsibility to respect human rights. They also ask States and commercial actors to consider how investors and lenders can better ensure that human rights are respected in the business ventures they facilitate and support, and how State-investor contracts can help to prevent human rights harms.

The UNGPs also challenge States, professionals engaged in international legal and policy development and investment practitioners to consider policy and legal questions, such as can and should international investment agreements support sustainable development and the protection of human rights? Should international human rights law qualify the rights of investors under IIAs? How should States abide by international legal obligations that sometimes seem to be poised in opposition to their human rights duties?

The Learning Hub has been established to explore these and other questions with a view to building understanding of how investment relates to human rights. In addition, the Hub will explore how human rights law and standards can help ensure investments avoid creating negative impacts and contribute positively to people’s lives. Finally, the learning fostered by focusing specifically on the human rights impacts of investment will provide a useful contribution to wider discussions on sustainable development and good governance.