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Social Bonds for Sustainable Development: A Human Rights Perspective on Impact Investing

  • Stephen Kim PARK


This article analyses the human rights implications of impact investing, which aims to create positive social and environmental impacts in addition to financial returns. Reflecting growing awareness of the capacity of the global capital markets to advance sustainable development, companies and institutional investors are seeking new financial instruments and strategies. This article focuses on social bonds, a prominent and illuminating example of this phenomenon. Social bonds are debt securities sold to investors whose proceeds are used to finance projects with a defined social benefit such as affordable housing, education, food security, and access to healthcare. To analyse social bonds in the context of human rights, this article proposes a framework for evaluating human rights factors in impact investing and applies it to the social bond market. It finds that current standards and practices do not adequately account for the human rights implications of social bonds. In light of these observations, this article suggests reforms to the social bond market that enhance investor assessment, external assurance, and impact-maximizing leverage.

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Assistant Professor of Business Law and Satell Fellow in Corporate Social Responsibility, University of Connecticut. A prior version of this article was presented at the Global Business and Human Rights Scholars Association Annual Conference in 2017. Support was provided by the Business and Human Rights Initiative at the University of Connecticut.



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1 ‘2030 Agenda Transforming our World: The 2030 Agenda for Sustainable Development’ (2030 Agenda), A/RES/70/1 (25 September 2015), preamble (‘[The SDGs] seek to realize the human rights of all …’).

2 United Nations Office of the High Commissioner for Human Rights, ‘Transforming Our World: Human Rights in the 2030 Agenda for Sustainable Development’, (accessed 20 April 2018).

3 See Pogge, Thomas and Sengupta, Mitu, ‘The Sustainable Development Goals (SDGs) as Drafted: Nice Idea, Poor Execution’ (2015) 24 Washington International Law Journal 571, 575576 .

4 MacNaughton, Gillian and Frey, Diane F, ‘Decent Work, Human Rights and the Sustainable Development Goals’ (2016) 47 Georgetown Journal of International Law 607, 644646 .

5 Human Rights Council, ‘Guiding Principles on Business and Human Rights: Implementing the United Nations “Protect, Respect and Remedy” Framework’ (Guiding Principles), A/HRC/17/31 (21 March 2011).

6 2030 Agenda, note 1, para 67.

7 United Nations Conference on Trade and Development, World Investment Report 2014 Investing in the SDGs: An Action Plan (Geneva: UNCTAD, 2014) 140 .

8 Ibid.

9 Davis Pluess, Jessica, Govan, Smruti and Pelaez, Paula, Conditions for Scaling Investment in Social Finance (San Francisco: Business for Social Responsibility (BSR), September 2015) 9, (accessed 20 April 2018).

10 See United Nations, Secretary-General, Press Release, ‘New United Nations–Private Sector Partnership Platform to Generate Financing Solutions for Sustainable Development Goals’, SG/2233-ENV/DEV/1736 (10 October 2016) (announcing the launch of a financial innovation platform to drive investment from governments, development finance institutions, foundations, as well as institutional investors and other private actors). As stated by the UN Secretary-General, ‘[t]his global initiative can support the identification and piloting of innovative finance instruments that can drive investment and support well thought-out SDG interventions’.

11 See Richardson, Benjamin J and Peihani, Maziar, ‘Universal Investors and Socially Responsible Finance: A Critique of a Premature Theory’ (2015) 30 Banking & Finance Law Review 405, 409411 (describing fiduciary capitalism).

12 See Brest, Paul and Born, Kelly, ‘When Can Impact Investing Create Real Impact?Stanford Social Innovation Review (Fall 2013), 24 (defining impact investing as ‘actively placing capital in enterprises that generate social or environmental goods, services, or ancillary benefits such as creating good jobs, with expected financial returns ranging from the highly concessionary to above market’). See also Weber, Olaf, ‘Impact Investing’ in Othmar M Lehner (ed.), Routledge Handbook of Social and Sustainable Finance (New York: Routledge, 2017) 85, 8586 (distinguishing impact investing from conventional investing and philanthropy).

13 See Casey O’Connor and Sarah Labowitz, ‘Putting the “S” in ESG: Measuring Human Rights Performance for Investors’ (New York: Center for Business and Human Rights, Stern School of Business, New York University, March 2017) 4–5; Principles for Responsible Investment, ‘What Do the UN Sustainable Development Goals Mean for Investors?’ (UNEP FI, UNCG, 2016),, 3.

14 See John G Ruggie, ‘Multinationals as Global Institution: Power, Authority and Relative Autonomy’ (2017) Regulation and Governance, (accessed 20 April 2018) (referring to allegations of whitewashing by critics of corporate social responsibility).

15 See Weber, note 12, 91–92 (examining green bonds as a prominent form of impact investing).

16 International Capital Markets Association, ‘The Social Bond Principles 2017 – Voluntary Process Guidelines for Issuing Social Bonds’ (Social Bond Principles) (2 June 2017), (accessed 20 April 2018).

17 Ibid.

18 Ulrik Ross, ‘Social Bonds’, HSBC (4 July 2016), (accessed 20 April 2018).

19 See Tessa Wilkie, ‘Social Bonds Busy Making More Friends’, Global Capital (29 September 2015), (accessed 20 April 2018).

20 See, e.g., de Felice, Damiano, ‘Banks and Human Rights Due Diligence: A Critical Analysis of the Thun Group’s Discussion Paper on the UN Guiding Principles on Business and Human Rights’ (2015) 19 The International Journal of Human Rights 319, 330 (‘The relationship between banks and human rights is under the spotlight … Research on banks and human rights is also proliferating around the world.’).

21 See Dowell-Jones, Mary, ‘Financial Institutions and Human Rights’ (2013) 13 Human Rights Law Review 423, 429 (‘This is the core of the challenge for the business and human rights agenda in the financial sector in light of the crisis – to focus on defining principles and methodologies that are practically applicable to the complex array of products, processes and services that make up modern finance, using the UN Guiding Principles as the normative framework.’).

22 See Ramasastry, Anita, ‘Corporate Social Responsibility Versus Business and Human Rights: Bridging the Gap Between Responsibility and Accountability’ (2015) 14 Journal of Human Rights 237, 249250 (contrasting the objectives of corporate social responsibility [CSR] and business and human rights [BHR]).

23 United Nations General Assembly, ‘Report of the World Commission on Environment and Development: Our Common Future’, A/42/427 (4 August 1987), annex, sec 1, para 27.

24 See K Park, Stephen and Berger-Walliser, Gerlinde, ‘A Firm-Driven Approach to Global Governance and Sustainability’ (2015) 52 American Business Law Journal 255, 270 .

25 See Elkington, John, Cannibals with Forks: The Triple Bottom Line of 21st Century Business (Gabriola, BC: New Society Publishers, 1998) 70, 96 .

26 Nanda, Ved P, ‘The Journey from the Millennium Development Goals to the Sustainable Development Goals’ (2016) 44 Denver Journal of Law and International Policy 389 .

27 UN General Assembly, ‘United Nations Millennium Declaration’, A/RES/55/2 (8 September 2000), paras 24–25.

28 Alston, Philip, ‘Ships Passing in the Night: The Current State of the Human Rights and Development Debate seen through the Lens of the Millennium Development Goals’ (2005) 27 Human Rights Quarterly 755, 760761 .

29 For example, the International Covenant on Economic, Social and Cultural Rights (ICESCR) provides that ‘[t]he States Parties to the present Covenant, recognizing the fundamental right of everyone to be free from hunger…’, International Covenant on Economic, Social and Cultural Rights, 993 United Nations Treaty Series 3 (16 December 1966), art 11, whereas the corresponding commitment in the MDGs provides ‘[w]e resolve…[t]o halve, by the year 2015, the proportion of the world’s people whose income is less than one dollar a day and the proportion of people who suffer from hunger...’, United Nations Millennium Declaration, note 27, para 19.

30 See Alston, Philip and Robinson, Mary, ‘The Challenges of Ensuring the Mutuality of Human Rights and Development Endeavors’ in Philip Alston and Mary Robinson (eds.), Human Rights and Development: Towards Mutual Reinforcement 3 (Oxford, 2005).

31 See, e.g., OHCHR, ‘Human Rights and the 2030 Agenda for Sustainable Development’, (accessed 20 April 2018) (‘OHCHR has made a strong contribution to the integration of human rights throughout the process to define the SDGs and will seek to ensure that strategies and policies to implement the 2030 Agenda are human rights-based.’).

32 Among the specific human rights instruments are the ICESCR, the International Covenant on Civil and Political Rights (ICESCR), the Universal Declaration of Human Rights (UDHR), the Convention on the Elimination of All Forms of Discrimination against Women (CEDAW), the Convention on the Rights of the Child (CRC), the Convention on the Rights of Persons with Disabilities (CRPD), the Declaration on the Right to Development (DRtD), the Declaration on the Rights of Indigenous Peoples (UNDRIP), the International Convention on the Protection of the Rights of All Migrant Workers and Members of Their Families (ICRMW), and several ILO conventions. See OHCHR, Table on SDGs and Related Human Rights (untitled), (accessed 20 April 2018). See also Danish Institute for Human Rights, ‘The Human Rights Guide to the Sustainable Development Goals’, (accessed 20 April 2018) (providing an interactive database).

33 2030 Agenda, note 1, 26, para 17.3.

34 Ibid, 27, para 17.17.

35 See Pogge and Sengupta, note 3, 585–86.

36 See Alston, note 28, 768.

37 Guiding Principles, note 5, Principle 5, Commentary.

38 See Committee on Economic, Social and Cultural Rights, ‘General Comment No. 24 on State Obligations under the International Covenant on Economic, Social and Cultural Rights in the Context of Business Activities’, E/C.12/GC/24 (adopted 23 June 2017), 7–8, para 21.

40 See Sharma, Avi, ‘Who Leads in a G-Zero World? Multi-Nationals, Sustainable Development, and Corporate Social Responsibility in a Changing Global Order’ (2015) 24 Washington International Law Journal 589, 607608 .

41 Gregory Unruh et al, ‘Investing for a Sustainable Future’, M.I.T. Sloan Management Review (11 May 2016) 1, 7 (noting that over 70 per cent of institutional investors consider sustainability as central to their investment decisions).

42 See, e.g., ‘SDGs are Becoming the Language for Investors when it comes to Assessing Impact’, Environmental Finance (24 March 2017), (accessed 20 April 2018); Alex Struc, ‘Sustainable Development Goals: Common Goals, Our Approach, Your Impact’ (Pimco, January 2017), (accessed 20 April 2018) (noting that ‘[i]nterviewees stated that they view the SDGs as a global declaration that investing in sustainable development is an investment opportunity for the private sector’).

43 Richardson, Benjamin J, ‘Keeping Ethical Investment Ethical: Regulatory Issues for Investing for Sustainability’ (2009) 87 Journal of Business Ethics 555 .

44 African Development Bank et al, ‘From Billions to Trillions: Transforming Development Finance – Post-2015 Financing for Development: Multilateral Development Finance’, DC2015-0002 (2 April 2015) 12.

45 H. Ho, Virginia, ‘Risk-Related Activism: The Business Case for Monitoring Non-Financial Risk’ (2016) 41 Journal of Corporation Law 629, 637638 .

46 See Pluess, Govan and Pelaez, note 9, 18. See also Ferrell, Allan, Liang, Hao and Renneboog, Luc, ‘Socially Responsible Firms’ (2016) 122 Journal of Financial Economics 585 (finding that strongly managed firms are more likely to be socially responsible).

47 Pluess, Govan and Pelaez, note 9, 17–19.

48 Goodman, Jennifer, Céline Louche, Katinka C Van Cranenburgh and Daniel Arenas, ‘Social Shareholder Engagement: The Dynamics of Voice and Exit’ (2014) 125 Journal of Business Ethics 193, 195 . See also Richardson, Benjamin J, ‘Socially Responsible Investing for Sustainability: Overcoming Its Incomplete and Conflicting Rationales’ (2013) 2 Transnational Environmental Law 311, 317 (defining complicity-based strategies for socially responsible investing).

49 See Waitzer, Edward J and Sarro, Douglas, ‘Fiduciary Society Unleashed: The Road Ahead for the Financial Sector’ (2014) 69 The Business Lawyer 1081, 1098 (calling for an integrative approach to investment that takes into account broader social, economic and environmental goals).

50 See Pluess, Govan and Pelaez, note 9, 21.

51 Rebecca Tekula and Archana Shah, ‘Impact Investing: Funding Social Innovation’ in Lehner (ed.), note 12, 125, 126.

52 Global Impact Investing Network, ‘2017 Annual Impact Investor Survey’ (May 2017) (GIIN 2017 Impact Investor Survey) 15, (accessed 20 April 2018).

53 See Bugg-Levine, Antony, Bruce Kogut and Nalin Kulatilaka, ‘A New Approach to Funding Social Enterprises’, Harvard Business Review (January–February 2012) 121122 .

54 Pluess, Govan and Pelaez, note 9, 29.

55 Global Impact Investing Network, note 52, 9.

56 See L Keohane, Georgia, Capital and Common Good (New York: Columbia University Press, 2016) 34 .

57 ‘What Is a Bond?’, Wall Street Journal, (accessed 20 April 2018).

58 See International Finance Corporation, ‘Social Bonds: Introduction and Impact Report’ (IFC Social Bonds Report) (March 2017) 3.

59 See Organisation for Economic Cooperation and Development, ‘Green Bonds: Mobilising the Debt Capital Markets for a Low-Carbon Transition’ (OECD Green Bond Report) (December 2015),[f3]%20[lr].pdf (accessed 20 April 2018).

60 See Abby Ivory, Paul F Brown and David Chen, ‘How Green Bonds Will Become Mainstream’ Stanford Social Innovation Review (18 July 2016), (accessed 20 April 2018).

61 International Capital Markets Association, ‘The Sustainability Bond Guidelines 2017’ (2 June 2017), (accessed 20 April 2018).

62 Earmarking consists of funds, such as from a bond issuance, which are set aside to pay for a specific project or event. Investopedia, ‘Earmarking’, (accessed 20 April 2018). In its most robust form, earmarking involves integration of the solicitation of financing, the sale of the financial instrument, the selection of the project, and the allocation of funds into a sub-account or a sub-portfolio prior to disbursement. International Finance Corporation, note 58, 6.

63 International Capital Markets Association, note 16, 1.

64 Ibid, 2–3.

65 Ross Lancaster, ‘Social Bonds Show Good Growth by Following Green Bond Path’, Global Capital (30 September 2016), (accessed 20 April 2018) (citing a study covering the period between 2014 and 2016).

66 International Capital Markets Association, note 16, 3.

67 Demel, Ana, ‘Second Thoughts on Social Impact Bonds’ (2013) 9 NYU Journal of Law & Business 503, 504505 , 509 (favourably contrasting green bonds to social impact bonds).

68 See Jon Hay, ‘Fixed Income: Is Responsible Investing Becoming the Norm?’ Global Capital (September 2015) 6 (noting growing interest among Principles for Responsible Investment [PRI] signatories in government and corporate bonds).

69 See Triantis, George G and Daniels, Ronald J, ‘The Role of Debt in Interactive Corporate Governance’ (1995) 83 California Law Review 1073, 1104–5 .

70 See ‘A Dull Shade of Green’, The Economist (29 October 2011), (accessed 20 April 2018).

71 Climate Bonds Initiative, ‘Explaining Green Bonds’, (accessed 20 April 2018).

72 Gartner, David, ‘Innovative Financing and Sustainable Development: Lessons from Global Health’ (2015) 24 Washington International Law Journal 495, 498501 .

73 Ibid. Through 2016, IFFIm raised US$5.7 billion through bond issuances. International Finance Facility for Immunisation Company, ‘Annual Report of the Trustees and Consolidated Financial Statements’ (31 December 2015) 15, (accessed 20 April 2018).

74 See Ben Edwards, ‘Green Bonds Go Social’, International Financing Review (April 2016) 14, (accessed 20 April 2018).

75 See Inter-American Development Bank, ‘Fact Sheet, Education, Youth and Employment (EYE) Bond’ (IDB EYE Bond Fact Sheet), (accessed 20 April 2018).

76 See International Finance Corporation, note 58.

77 See Instituto de Crédito Oficial, ‘ICO – Social Bonds’, (accessed 20 April 2018). ICO (Instituto de Crédito Oficial) is a state-owned bank under Spain’s Ministry of Economic Affairs, Industry and Competitiveness. See Instituto de Crédito Oficial, ‘What is ICO?’, (accessed 20 April 2018).

78 FMO is the development bank of the Netherlands, and its sustainability bond includes inclusive finance (principally microfinance) as a category for its use of proceeds. See Sustainalytics, ‘FMO Sustainability Bond – Framework Summary and Second Opinion’ (April 2015), 2–3, (accessed 20 April 2018).

79 Starbucks, Press Release, ‘Starbucks Issues the First U.S. Corporate Sustainability Bond’ (16 May 2016), (accessed 20 April 2018).

80 Danone’s social bond was the first issued by a multinational corporation under the Social Bond Principles. Danone, Press Release, ‘Danone Successfully Issues a Pioneer €300m Social Bond Continuing to Invest for Sustainable Value for All’ (19 March 2018), (accessed 20 April 2018).

81 Lloyds Bank, Press Release, ‘Lloyds Bank Completes Allocation of its Inaugural £250 Million Environmental, Social and Governance Bond’ (24 March 2015), (accessed 20 April 2018).

82 See Sophia Grene, ‘Lloyds Bank Goes Green and Patriotic’, Financial Times (3 August 2014), (accessed 20 April 2018) (‘[Lloyds’ ESG bond] makes it suitable for the growing number of asset managers with targets for allocations to responsible investment, but who are unwilling to see higher risk or lower return as a trade-off.’).

83 Wilkie, note 19.

84 See International Finance Corporation, ‘Social Bond Program’, 7, (accessed 20 April 2018).

85 Helen Bartholomew, ‘World Bank Issues First UN Sustainable Development Bond’, Reuters (9 March 2017), (accessed 20 April 2018).

86 See World Bank, Press Release, ‘World Bank Launches Financial Instrument to Expand Funding for Sustainable Development Goals’ (9 March 2017), (accessed 20 April 2018).

87 Ibid.

88 Sustainalytics, ‘The Instituto de Crédito Official Social Bond – Framework Overview and Second-Party Opinion by Sustainalytics’ (ICO Social Bond Second Opinion) (2014), 3, (accessed 20 April 2018).

89 Ibid.

90 See 2030 Agenda, note 1, 26, 19, para 8.3 (‘Promote development-oriented policies that support productive activities, decent job creation, entrepreneurship, creativity and innovation, and encourage the formalization and growth of micro-, small- and medium-sized enterprises, including through access to financial services’); see also Sustainalytics, ‘Sustainable Momentum – 2015 Sustainability Report’ 24, (accessed 20 April 2018).

91 Sustainalytics, ‘Starbucks Corporation Sustainability Bond – Framework Overview and Second Opinion by Sustainalytics’ (6 March 2017) 4–5, (accessed 20 April 2018).

92 Many green bonds focus on low carbon infrastructure. See Organisation for Economic Cooperation and Development, note 59, 2–3. Green bond financing directly aligns with SDGs 6 (Clean Water and Sanitation), 7 (Affordable and Clean Energy), 11 (Sustainable Cities and Communities), 12 (Responsible Consumption and Production), 13 (Climate Change), 14 (Life below Water), and 15 (Life on Land).

93 Sustainalytics, ‘Lloyds Bank – Helping Britain Proper ESG Bond Framework’ (30 June 2014) 8, (accessed 20 April 2018).

94 See 2030 Agenda, note 1, 26, 22, para 11.6 (‘By 2030, reduce the adverse per capita environmental impact of cities, including by paying special attention to air quality and municipal and other waste management’).

95 See ibid, para 3.8 (‘Achieve universal health coverage, including financial risk protection, access to quality essential health-care services and access to safe, effective, quality and affordable essential medicines and vaccines for all’).

96 Dowell-Jones, note 21, 429.

97 See UBS, ‘Thun Group’, (accessed 20 April 2018). See also de Felice, note 20, 325–30 (identifying and analysing shortcomings in the Thun Group’s approach to the human rights obligations of banks).

98 See The Equator Principles III (June 2013), 2, (accessed 20 April 2018).

99 Organisation for Economic Cooperation and Development, ‘Responsible Business Conduct for Institutional Investors: Key Considerations for Due Diligence under the OECD Guidelines for Multinational Enterprises’ (OECD Institutional Investor Guidance) (28 March 2017), (accessed 20 April 2018).

100 Principles for Responsible Investment, ‘The Six Principles’, (accessed 20 April 2018).

101 Global Impact Investing Network, ‘Achieving the Sustainable Development Goals: The Role of Impact Investing’ (September 2016), (accessed 20 April 2018).

102 See Conley, John M and Williams, Cynthia A, ‘Global Banks as Global Sustainability Regulators?: The Equator Principles’ (2011) 33 Law and Policy 542, 543544 .

103 See, e.g., Scherer, Andreas G, Palazzo, Guido and Baumann, Dorotheé, ‘Global Rules and Private Actors: Toward A New Role of The Transnational Corporation In Global Governance’ (2006) 16 Business Ethics Quarterly 505, 512 (‘…economic actors undermine the internal sovereignty of nation states, namely the state’s ability to independently set rules and limit or regulate domestic private activities within its jurisdiction’).

104 Vogel, David, The Market for Virtue: The Potential and Limits of Corporate Social Responsibility (Washington, DC: Brookings Institution Press, 2005) 9 (‘Civil regulation represents an effort to fill the governance gap between the law and the market.’).

105 Abbott, Kenneth W and Snidal, Duncan, ‘Strengthening International Regulation Through Transnational New Governance: Overcoming the Orchestration Deficit’ (2009) 42 Vanderbilt Journal of Transnational Law 501, 520533 . A growing number of multi-stakeholder initiatives (MSIs) include corporations, civil society organizations and other actors such as governments and unions. Waddock, Sandra, ‘Building a New Institutional Infrastructure for Corporate Responsibility’ (2008) 22 Academy of Management Perspectives 87, 9799 .

106 Kirton, John J and Trebilcock, Michael J, ‘Introduction: Hard Choices and Soft Law in Sustainable Governance’ in John J Kirton and Michael J Trebilcock (eds.), Hard Choices, Soft Law: Voluntary Standards in Global Trade, Environment and Social Governance (London: Routledge, 2004) 3, 2223 .

107 U Gilbert, Dirk, Andreas Rasche and Sandra Waddock, ‘Accountability in the Global Economy: The Emergence of International Accountability Standards’ (2011) 21 Business Ethics Quarterly 23, 24 .

108 Human rights due diligence is a process ‘to identify, prevent, mitigate and account for how they address their impacts on human rights’, Guiding Principles, note 5, Principle 15(b). This process includes ‘assessing actual and potential human rights impacts, integrating and acting upon the findings, tracking responses, and communicating how impacts are addressed’. Ibid, Principle 17.

109 Ibid, Principle 18. See also McCorquodale, Robert, Lise Smit, Stuart Neely and Robin Brooks, ‘Human Rights Due Diligence in Law and Practice: Good Practices and Challenges for Business Enterprises’ (2017) 2:2 Business and Human Rights Journal 195, 205 .

110 Organisation for Economic Cooperation and Development, note 99, 11. See also McCorquodale et al, note 109, 199–200 (distinguishing between business management due diligence and human rights due diligence).

111 See Guiding Principles, note 5, Principle 18, Commentary (noting the need for assessment of human rights impacts at regular intervals).

112 See Institute for Human Rights and Business, ‘State of Play: Business and the Sustainable Development Goals: Mind the Gap – Challenges for Implementation’ (September 2015) 53, (accessed 20 April 2018).

113 See de Felice, note 20, 324 (criticizing the Thun Group’s position on distinguishing human rights due diligence for general versus specific purpose financing).

114 See Mena, Sébastien and Palazzo, Guido, ‘Input and Output Legitimacy of Multi-Stakeholder Initiatives’ (2012) 22 Business Ethics Quarterly 527, 537541 (identifying inclusion, procedural fairness, consensual orientation, and transparency as criteria for measuring the input legitimacy of MSIs).

115 Götzmann, Nora, ‘Human Rights Impact Assessment of Business Activities: Key Criteria for Establishing a Meaningful Practice’ (2017) 2:1 Business and Human Rights Journal 87, 99 (arguing for the participation and inclusion of affected parties).

116 See The Equator Principles III, note 98, 7–8.

117 See Götzmann, note 115, 99.

118 See Organisation for Economic Cooperation and Development, note 99, 16 (defining due diligence as an ‘on-going, proactive and reactive, and process-oriented activity’).

119 See Götzmann, note 115, 101, 105.

120 O’Connor and Labowitz, note 13, 18–22.

121 See M Meier, Benjamin and Kim, Yuna, ‘Human Rights Accountability through Treaty Bodies: Examining Human Rights Treaty Monitoring for Water and Sanitation’ (2015) 26 Duke Journal of Comparative & International Law 142, 221 (analysing water and sanitation reporting under the ICESCR). Even development banks such as the World Bank struggle to ensure that the companies that they finance identify, analyse, and report human rights impacts. See Evans, Jessica, ‘The Record of International Financial Institutions on Business and Human Rights’ (2016) 1:2 Business and Human Rights Journal 327, 327328 .

122 Dowell-Jones, note 21, 446–47. See also UN System Task Team on the Post-2015 UN Development Agenda, Working Group on ‘Financing for Sustainable Development’, ‘Executive Summary’ (UN System Task Team Executive Summary) 6, (accessed 20 April 2018) (noting the negative impact of misaligned and short-term incentives on the willingness of institutional investors to support sustainable development).

123 See Hess, David, ‘The Three Pillars of Corporate Social Reporting as New Governance Regulation: Disclosure, Dialogue, and Development’ (2008) 18 Business Ethics Quarterly 447, 454455 .

124 Guiding Principles, note 5, Principle 21, Commentary (‘Communication can take a variety of forms, including in-person meetings, online dialogues, consultation with affected stakeholders, and formal public reports.’).

125 Ibid. See also Ruggie, John Gerard, Just Business: Multinational Corporations and Human Rights (New York: W.W. Norton, 2013) 99 (‘To discharge the responsibility to respect human rights requires that companies develop the institutional capacity to know and show that they do not infringe on others’ rights.’).

126 See Organisation for Economic Cooperation and Development, note 99, 29 (recommending that investors participate in industry-based disclosure initiatives as part of individual and collective efforts to obtain more information from investee companies).

127 Sethi, S Prakash, Terrence F Martell and Mert Demir, ‘Enhancing the Role and Effectiveness of Corporate Social Responsibility (CSR) Reports: The Missing Element of Content Verification and Integrity Assurance’ (2017) 144 Journal of Business Ethics 59, 61 .

128 Ibid, 62.

129 Waddock, note 105, 91.

130 See Potoski, Matthew and Prakash, Aseem, ‘Green Clubs and Voluntary Governance: ISO 14001 and Firms’ Regulatory Compliance’ (2005) 49 American Journal of Political Science 235, 246 (noting that external audits of ISO 14001 compliance prevent whitewashing).

131 Blair, Margaret M, Williams, Cynthia A and Lin, Li-Wen, ‘The New Role for Assurance Services in Global Commerce’ (2008) 33 Journal of Corporation Law 325, 345 .

132 See Organisation for Economic Cooperation and Development, note 99, 29 (‘[I]nformation or claims about RBC risk or impacts does not have to be completely verified in order to trigger further investigation and closer engagement’).

133 See Guiding Principles, note 5, Principle 20.

134 Dowell-Jones, note 21, 449. See also Conley, John M and Williams, Cynthia A, ‘Engage, Embed, and Embellish: Theory Versus Practice in the Corporate Social Responsibility Movement’ (2005) 31 Journal of Corporation Law 1, 2123 (recounting and analysing sharply divergent views among institutional investors).

135 See Waitzer and Sarro, note 49, 1090.

136 Richardson, Benjamin J and Cragg, Wes, ‘Being Virtuous and Prosperous: SRI’s Conflicting Goals’ (2010) 92 Journal of Business Ethics 21, 3233 .

137 Guiding Principles, note 5, Principle 19.

138 Ibid, Principle 19(b).

139 Organisation for Economic Cooperation and Development, note 99, 32; see also Richardson and Peihani, note 11, 433.

140 Organisation for Economic Cooperation and Development, note 99, 31–33 (listing types of engagement strategies). Equity-based impact investing is prevalent in venture philanthropy and other impact investment strategies that employ venture capital or private equity models. See Tamaki Onishi, ‘Institutional Analysis of Venture Philanthropy’ in Lehner (ed.), note 12, 342, 354.

141 Organisation for Economic Cooperation and Development, note 99, 33.

142 Brest and Born, note 12, 25.

143 See Wettstein, Florian, ‘CSR and the Debate on Business and Human Rights: Bridging the Great Divide’ (2012) 22 Business Ethics Quarterly 739, 757759 . This is consistent with approaches to human rights due diligence that take into account a company’s positive human rights impacts as well as its adverse impacts. See Götzmann, note 115, 98.

144 Wood, Stepan, ‘The Case for Leverage-Based Corporate Human Rights Responsibility’ (2012) 22 Business Ethics Quarterly 63, 64 (‘Leverage-based responsibility… arises from an organization’s ability to influence the actions of other actors through its relationships, regardless of whether the impacts of those other actors’ actions can be traced to the organization.’).

145 See ibid, 83–85 (defining the basis for morally significant connections).

146 The problem of adverse collateral impacts has arisen in green bond financed projects. See Banktrack, ‘Open Letter on the 2015 Update of the Green Bond Principles’ (30 April 2015) 2, (accessed 20 April 2018).

147 Götzmann, note 115, 98.

148 See Park, Stephen K, ‘Investors as Regulators: Green Bonds and the Governance Challenges of the Sustainable Finance Revolution’ (2018) 54 Stanford Journal of International Law 1, 3536 ; European Commission, ‘Action Plan: Financing Sustainable Growth’, COM(2018) 97 final (8 March 2018) 4–5.

149 The SBPs are modelled on the Green Bond Principles in the parallel green bond market. See International Capital Market Association, Press Release, ‘Green Bond Principles Evolve to Encourage New Categories of Issuers and Embrace Social & Sustainability Bond Market Participants’ (14 June 2017),,-Social-and-Sustainability-Bonds-Press-release.pdf (accessed 20 April 2018).

150 International Capital Markets Association, note 16, 2–3.

151 See Gilbert, Rasche and Waddock, note 107, 29 (defining process standards).

152 According to the SBPs:

[The SBPs] provide issuers with guidance on the key components involved in launching a credible Social Bond; they aid investors by promoting availability of information necessary to evaluate the positive impact of their Social Bond investments; and they assist underwriters by moving the market towards expected disclosures that will facilitate transactions.

International Capital Markets Association, note 16, 2.

153 See ibid (‘The SBP recommend a clear process and disclosure for issuers, which investors, banks, investment banks, underwriters, placement agents and others may use to understand the characteristics of any given Social Bond.’).

154 The SBPs’ disclaimer makes clear their voluntary, non-binding nature:

The Social Bond Principles are voluntary process guidelines that neither constitute an offer to purchase or sell securities nor constitute specific advice of whatever form (tax, legal, environmental, accounting or regulatory) in respect of Social Bonds or any other securities. The Social Bond Principles do not create any rights in, or liability to, any person, public or private. Issuers adopt and implement the Social Bond Principles voluntarily and independently, without reliance on or recourse to the Social Bond Principles, and are solely responsible for the decision to issue Social Bonds. Underwriters of Social Bonds are not responsible if issuers do not comply with their commitments to Social Bonds and the use of the resulting net proceeds. If there is a conflict between any applicable laws, statutes and regulations and the guidelines set forth in the Social Bond Principles, the relevant local laws, statutes and regulations shall prevail.

International Capital Markets Association, note 16, 5 (emphasis added).

155 International Finance Corporation, note 58, 4.

156 International Capital Markets Association, note 16, 3 (defining guidelines for process for project evaluation and selection).

157 Fasterling, Björn, ‘Human Rights Due Diligence as Risk Management: Social Risk Versus Human Rights Risk’ (2017) 2:2 Business and Human Rights Journal 225, 230231 .

158 See ibid, 238–40 (examining problems associated with commensurability and human rights risk).

159 International Capital Markets Association, note 16, 3 (‘Transparency is of particular value in communicating the expected impact of projects.’).

160 Ibid (‘[The SBPs] emphasise the required transparency, accuracy and integrity of information that will be disclosed and reported by issuers to stakeholders.’).

161 See Wilkie, note 19 (noting how the diversity of loans financed by social bonds render it difficult to standardize reporting and accurately assess social impact for each project).

162 International Capital Markets Association, note 16, 2 (‘[The SBPs] are intended for broad use by the variety of actors participating in the market and are designed to provide the information needed to increase capital allocation to social projects without any single arbiter.’).

163 See ibid, 2–3.

164 See International Capital Markets Association, The Green Bond Principles and the Social Bond Principles, Governance Framework (14 June 2017), sec 3.3.2, (accessed 20 April 2018) (‘[The Executive Committee] 1) appoints and oversees the Secretariat; 2) approves formal Principles communications; 3) votes on amendments to the Principles; and, 4) can propose and validate issue-specific working groups including Members and Observers.’).

165 International Capital Markets Association, ‘Executive Committee and Working Groups’, (accessed 20 April 2018).

166 GBP Executive Committee 2016/2017 Working Groups, ‘Working Group – Social Bonds’, (accessed 20 April 2018).

167 See Maximilian Martin, ‘Building the Impact Investing Market: Drivers of Demand and the Ecosystem Conditioning Supply’ in Lehner (ed.), note 12, 672, 681–85 (describing the impact investing ecosystem).

168 With a social impact bond, investors provide up-front capital for a social project (e.g., reducing prison recidivism, enhancing employment opportunities for vulnerable youth) and are paid a financial return upon the successful completion of the project. Jim Clifford and Tobias Jung, ‘Social Impact Bonds: Exploring and Understanding an Emerging Funding Approach’ in Lehner (ed.), note 12, 161, 169, 171–72; Burand, Deborah, ‘Globalizing Social Finance: How Social Impact Bonds and Social Impact Performance Guarantees Can Scale Development’ (2013) 9 NYU Journal of Law & Business 447, 453 .

169 See Jitinder Kohli, Douglas J Besharov and Kristina Costa, ‘What are Social Impact Bonds?’, Center for American Progress (22 March 2012), (accessed 20 April 2018).

170 See Social Finance UK, ‘A Technical Guide to Developing Social Impact Bonds’ (January 2013), 5, 9, (emphasizing stakeholder engagement as best practice).

171 International Capital Markets Association, note 16, 3. See International Capital Markets Association, Green, Social and Sustainability Bonds, Resource Centre, (accessed 20 April 2018).

172 Triantis and Daniels, note 69, 1088–89.

173 See, e.g., Inter-American Development Bank, note 75, 1–2 (designating any project approved by the IDB’s management and/or executive directors that falls under one of 13 categories of human capital development under education, youth and employment).

174 Among the social bonds and sustainability bonds available on one publicly available database, nearly three-quarters (18 out of 25) were issued by a bank. See Sustainalytics, ‘Green and Social Bond Projects’, (accessed 20 April 2018).

175 See, e.g., International Finance Corporation, note 58, 11, 20 (describing use of proceeds reporting for its Inclusive Business Bonds and Banking on Women Bond programmes, respectively); Sustainalytics, note 88, 3.

176 See, e.g., The Instituto de Crédito Oficial, ‘Social Bond Reporting’, (accessed 20 April 2018) (noting that 11,927 projects were supported by a single 500 euro social bond).

177 International Capital Markets Association, note 16, 4.

178 Cicero, ‘Framework for CICERO’s “Second Opinions” on Green Bond Investments’ (2016) 2, (accessed 20 April 2018).

179 See ibid, 5.

180 Sustainalytics, ‘Bond Services, Annual Compliance Reviews’, (accessed 20 April 2018).

181 See Organisation for Economic Cooperation and Development, note 99, 37.

182 See ibid.

183 See Amihud, Yakov, Garbade, Kenneth and Kahan, Marcel, ‘A New Governance Structure for Corporate Bonds’ (1999) 51 Stanford Law Review 447, 462465 (explaining why bond covenants are relatively permissive).

184 See Santoro, Michael A, ‘Business and Human Rights in Historical Perspective’ (2015) 14 Journal of Human Rights 155, 158 (noting the divide between proponents of legal and moral approaches).

185 Vogel, David, ‘Private Global Business Regulation’ (2008) 11 Annual Review of Political Science 261, 267268 .

186 See, e.g., Marc Jones, ‘Don’t Strangle Green Bond Market, EBRD Urges Regulators’ Reuters (5 July 2016), (accessed 20 April 2018).

187 See Abbott and Snidal, note 105, 551 (noting the ability of private and public-private hybrid governance regimes to enhance compliance).

188 See Wettstein, note 143, 756–59.

189 See Wettstein, Florian, ‘Normativity, Ethics, and UN Guiding Principles on Business and Human Rights: A Critical Assessment’ (2015) 14 Journal of Human Rights 162, 174 .

190 See Voegtlin, Christian and G Scherer, Andreas, ‘Responsible Innovation and the Innovation of Responsibility: Governing Sustainable Development in a Globalized World’ (2015) 143 Journal of Business Ethics 227 (proposing reforms to ensure responsible innovation that contributes to sustainable development).

191 See Sustainable Development Solutions Network, ‘Indicators and a Monitoring Framework for the Sustainable Development Goals’ (15 May 2015), (accessed 20 April 2018).

192 See ibid, 16 (noting the joint initiative between the Global Reporting Initiative (GRI), the UN Global Compact (UNGC), and the World Business Council for Sustainable Development (WBCSD)).

193 International Capital Markets Association, ‘Quarterly Newsletter of the Green & Social Bond Principles’ (April 2018), (accessed 20 April 2018).

194 The World Bank, one of the pioneers of the green bond market, reports on the sustainability impact of green bonds on a project-by-project basis. See World Bank, Green Bond Impact Report (Washington, DC: World Bank, June 2016) 1123 , (accessed 20 April 2018).

195 Climate Bonds Initiative, ‘Climate Bonds Standard Version 2.1’ (January 2017) 6–9, (accessed 20 April 2018).

196 Ibid, 4.

197 European Union High-Level Working Group on Sustainable Finance, ‘Financing a Sustainable European Economy: Final Report 2018’ (EU Working Group Final Report) (2018) 34, (accessed 20 April 2018).

198 International Capital Markets Association, note 16, 4.

199 See EU Working Group Final Report, note 197, 32 (outlining the provisions of the proposed EU Green Bond Standard).

200 Bugg-Levine et al, note 53, 120.

201 See Climate Bonds Initiative, ‘Scaling Up Green Bond Markets for Sustainable Development’ (2015) 14, (accessed 20 April 2018) (calling for strategic bond issuances by public entities).

202 2030 Agenda, note 1, 11, para 43.

203 Kinley, David, Necessary Evil: How to Fix Finance by Saving Human Rights (New York: Oxford University Press, 2018) 101 .

204 Muchlinski, Peter, ‘Implementing the New UN Corporate Human Rights Framework: Implications for Corporate Law, Governance, and Regulation’ (2012) 22 Business Ethics Quarterly 145, 156 (noting overlap between human rights risk and commercial risks such as reputational damage and lawsuits).

* Assistant Professor of Business Law and Satell Fellow in Corporate Social Responsibility, University of Connecticut. A prior version of this article was presented at the Global Business and Human Rights Scholars Association Annual Conference in 2017. Support was provided by the Business and Human Rights Initiative at the University of Connecticut.



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