Who is this guide for?

This guide is designed for banks and other financial institutions to help them strengthen their approaches to tackling child labour in the activities and value chains of their corporate clients. It provides tools and strategies to improve screening practices, client engagement, and participation in multi-stakeholder initiatives.

Child labour: Context

Child labour remains a persistent global issue, despite progress made by companies in recent years. In 2021, there was an alarming increase in child labour, particularly migrant child labour, in the United States. Financial institutions have a responsibility to respect human rights, including those of children, and this guide aims to help them fulfil that responsibility.

A note on children’s rights and business

Children’s rights encompass a wide range of rights necessary for their well-being and development. Child labour is both a cause and consequence of multiple children’s rights deprivations. Businesses can directly or indirectly impact children’s rights through their operations, products, and services. The guide highlights the interconnectedness of child labour with other children’s rights issues, such as online safety, health, and environmental impacts. It emphasises the need for businesses to understand and address child labour as a child rights issue.

Salient child rights risks for banks and financial institutions

Financial institutions can be exposed to child labour risks through their corporate clients’ activities and value chains. They have a responsibility to conduct due diligence and ensure that their financing does not contribute to child labour. The guide outlines potential child rights risks for banks, including those related to customer exploitation, product design, screening processes, supply chains, and handling of personal information. It also provides examples of how financial institutions can impact children’s rights directly, such as through their employment practices and anti-money laundering efforts.

Defining child labour

The guide defines child labour as work that deprives children of their childhood, potential, and dignity, and harms their physical or mental development. It clarifies that not all work done by children under 18 is considered child labour, as light work may be permitted from the age of 13, and full-time work from 15, as long as it is not hazardous. The guide provides a graphic illustration of how child labour is determined by both the child’s age and the nature and conditions of the work.

Levelling up on due diligence for child labour

The guide outlines three ways in which financial institutions can strengthen their due diligence processes to address child labour risks:

• Improve screening for indicators of child labour risk: Financial institutions should assess the likelihood of child labour risk in their portfolio companies by considering factors such as the operating context, business relationships, business activities, and the presence of vulnerable groups.
• Improve engagement with portfolio companies on action on child labour: Financial institutions can use their leverage to ask better questions and set higher expectations of portfolio companies regarding child labour. The guide suggests alternative lines of inquiry to assess companies’ connections to child labour, alignment with international standards, reliance on audits, and efforts to address child labour.
• Participate in multi-stakeholder initiatives that include action on child labour: Financial institutions can join relevant multi-stakeholder initiatives (MSIs) to address child labour issues collectively. These initiatives bring together key stakeholders to tackle root causes, strengthen capacity, and promote sustainable practices.

Conclusion

The guide concludes by highlighting the business case for taking stronger action on child labour and child rights impacts. It emphasises the legal and reputational risks associated with child labour and the growing disclosure and procurement requirements that necessitate robust due diligence. By implementing the recommendations in this guide, banks and financial institutions can play a crucial role in eradicating child labour and advancing children’s rights.