Global Private Regulation, Global Finance and the Future of Corporate Human Rights Accountability

Ariel Meyerstein, University of California, Berkeley

Abstract

The large industrial footprints of large-scale infrastructure projects often impose a variety of environmental and social harms on local, marginalized (often indigenous) populations, many of whom, particularly in countries with weak regulatory capacity, have very little political voice in the project approval process. In 2003, responding to pressure from transnational activists and the changing norms and practices of development finance institutions such as the World Bank, some of the largest commercial banks in the world created a global private regulatory regime—the Equator Principles (“EPs”)—to standardize their environmental and social risk review of their investments in these projects. This Article contextualizes the emergence of the Equator Principles among the broader shift to new forms of global governance and explores how the impact of such governance regimes can be measured. Drawing inspiration from recent scholarship by regulation scholars of domestic voluntary regimes, the Article explores how “process”-focused metrics can be an important measurement of regime effectiveness.

Implementing this empirical approach, the Article presents the first global survey of the implementation of the participating banks—Equator Principle Financial Institutions (“EPFIs”)—measured along two dimensions: (a) how individual institutions have changed their organizational structures, policies and procedures following their decisions to adopt the EPs and (b) how they have contributed to the growth and evolution of the regime. While institutional change is not a perfect proxy for measuring impacts “on the ground,” I argue that it is a particularly useful measurement for the study of global private regulation related to corporate human rights accountability. Both the United Nations Guiding Principles on Business and Human Rights and the OECD’s update of its Guidelines for Multinational Business Enterprises suggest that corporate human rights accountability be carried out primarily by the development of robust due diligence mechanisms not unlike those required by the Equator Principles. The article concludes by discussing how the development of private regimes like the Equator Principles has allowed global financial institutions to take an increasingly powerful role in shaping global policy related to sustainability and human rights.