What are the obligations of those who invest in corporations?

Abstract

Institutional investors have a significant role to play in enforcing international human rights standards. Simply by choosing whether or not to invest in corporations and by imposing investment conditions, institutional investors have the ability to influence multinational corporations to comply with international human rights and environmental standards. Institutional investors are thus a potential regulator themselves in the absence of effective state control. Many institutional investors already take factors relating to a corporation's social responsibility into account when making investment decisions. But what happens when they do not? Where institutional investors overlook these factors and invest in corporations that commit human rights violations, the following questions must be asked: Are such investors complicit in the harmful actions of the multinational corporations that they fund? Do institutional investors have a legal obligation under international human rights law to take steps to help prevent the violation of human rights by the corporations in which they invest? Is it lawful for institutional investors to make a profit from the operations of multinational corporations that are complicit in, or commit, human rights violations? Given the significant power of institutional investors globally, especially in developing world investment, it is interesting to note that relatively little attention has been paid to this actor in the international law debates regarding human rights and business.