The Corporate Social Responsibilities of Financial Institutions for the Conduct of Their Borrowers: The View from International Law and Standards

32 Pages Posted: 17 Apr 2017 Last revised: 6 Jun 2017

See all articles by Larry Catá Backer

Larry Catá Backer

The Pennsylvania State University (University Park) – Penn State Law

Date Written: April 16, 2017


Corporate social responsibility (CSR) can be split along two distinct lines. The first touches on the nature of corporate personality and is rooted in domestic law regulating enterprises specifically and legal persons generally. The second touches on the nature of the rights of individuals and is rooted in international law (and sometimes domestic constitutional law) defining the scope of the human rights of individuals and the consequential obligations of states and legal persons. Both conversations intertwine though they tend to operate autonomously. In both cases, however, the traditional focus of corporate responsibility has focused on the relationship between an operating company and its direct effects on individuals, society and the environment. But increasing attention has been paid to indirect compliance through private intermediaries—the financial institutions which provide operating capital to enterprises. This article considers the corporate social responsibilities of financial institutions, including sovereign wealth funds, for the conduct of their borrowers. The focus will be the extent of any duty or responsibility of lenders to ensure that their borrowers comply with CSR obligations (or alternatively conforms to international human rights standards) as a core aspect of their own CSR obligations (or alternatively of their responsibility to respect human rights). Section II examines the general regulatory framework. There are two aspects that are relevant. The first is to understand the scope and character of the legal norms that may be applied to enterprises generally with respect to their operations that might be understood as CSR-human rights related in nature. The second is to consider the range of non-legal normative governance rules that might apply. In the process it will be important to distinguish between a CSR based regulatory approach and a human rights based approach. Section III considers the application of these norms to financial institutions. This requites distinguishing between those obligations that apply to the internal operations of financial institutions generally, and those obligations that apply to the financial institution’s obligations with respect to its lending activities, that is with respect to its relationship with its borrowers. The essay ends with a brief examination of recent cases in which financial institutions undertook such a responsibility, and the ways in which that obligation was undertaken.

Keywords: CSR, corporate social responsibility, business and human rights, sustainability, Equator principles, UN Guiding Principles Business Humna Rights, Modern Slavery Act, transparency, corporate disclosure, multinaitonal enterprises

JEL Classification: F02, F23, K33, M14

Suggested Citation

Backer, Larry Catá, The Corporate Social Responsibilities of Financial Institutions for the Conduct of Their Borrowers: The View from International Law and Standards (April 16, 2017). Lewis & Clark Law Review, Vol. 21, 2017, Penn State Law Research Paper No. 8-2017, Available at SSRN:

Larry Catá Backer (Contact Author)

The Pennsylvania State University (University Park) – Penn State Law ( email )

Lewis Katz Building
University Park, PA 16802
United States

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