The article undertook a review of the extent to which the Australian financial sector incorporates international humanitarian law (IHL) into investment and operational decision-making. Findings from the confidential report reveal considerable knowledge gaps in IHL awareness and the limited integration of IHL considerations and conflict-related risks in policies and reports, particularly within financial institutions.

The report highlights that corporates are exposed to financial, legal, operational, and reputational risks if the rules of IHL are not complied with. The report emphasises the need for proactive preparation by businesses before the occurrence of conflicts instead of avoiding doing business in conflict-affected countries or regions. Besides, while there is a growing interest among financial institutions for conflict-sensitive investment practices and understanding, the report suggests that more work needs to be done to integrate IHL in policies and practices, including awareness-raising and training initiatives.

The research reports highlight that the implementation of a conflict-sensitive approach would complement the broader trend towards doing business responsibly and in line with voluntary human rights regulations. Thus, the report recommends that the adoption of a conflict-sensitive approach that respects the rules of IHL into investment practices is crucial for financial institutions to genuinely conduct responsible business operations. To achieve this, the report suggests the development of specific IHL guidance and conflict-sensitive standards for responsible investment practices in armed conflict in place to manage potential investment risks effectively and respect the lives and dignity of those affected.

More specifically, in May 2023, the Responsible Investment Association Australasia (RIAA) released its Investor Toolkit on Human Rights and Armed Conflict. The guide was designed to help investors in managing human rights impacts and IHL implications before, during, and after conflicts. The report suggests that increasing the availability of such guidance and the provision of investors’ context will help pave the way forward in implementing conflict-sensitive and IHL-compliant investment practices.

The report concludes that there is a pressing need to deepen corporate understanding of IHL and its relevance to financial institutions, while effective embedding conflict sensitivity and IHL into corporate policies and practices. The report suggests that practical guidance and training via IHL-based toolkits are essential. Finally, a proactive approach is essential for corporations and the institutions that invest in them to embed conflict sensitivity and IHL considerations into investment practices effectively, in line with international frameworks and regulations.