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Blog | Wednesday June 4, 2025

Advancing a People-Centered Approach to Sovereign Debt

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Due to several factors, including the rapid increase of global interest rates, depreciation of local currencies, higher risk premiums, among others, many developing countries, particularly developing economies with the weakest credit ratings, are unable to fulfill their financial obligations to external creditors, sparking a “silent debt crisis” and leading to default, restructuring, and the requirement to refinance about US$60 billion in external debt annually. This means allocating twice as many resources to servicing public debts while diverting scarce resources away from socioeconomic development. In the recent World Bank Group Spring Meetings, the IMF called for the urgency in dealing with complex trade-offs between increasing sovereign debt, slower growth, and new spending pressures. Following a decade-long sovereign debt market boom, global public debt is expected to rise by an additional 2.8 percent of GDP by 2025 and to reach 100 percent of GDP by 2030. 

This financial crisis is also a human rights crisis. While sovereign debt can help fund sustainable development, excessive public debt and high interest rates burden developing countries. By 2023, 3.3 billion people lived in countries spending more on interest payments than on critical public expenditures including 54 developing countries that allocated over 10 percent of government revenues to interest payments, outpacing growth in critical public expenditures, such as education, health, and other human rights-related expenditures. At the Spring Meetings, participants emphasized that growth must translate into better livelihoods through effective fiscal and monetary policies, transparency, and good governance.

This is key for private creditors, who own 61 percent of developing countries’ debt, and whose lending terms are more volatile and expensive than concessional financing. Private creditors have also financed repressive regimes responsible for severe human rights violations. This represents a twofold problem for responsible finance because sovereign bond investors may: 

• Restrict governments’ ability to deliver human rights by demanding lending conditions mostly favorable to creditors, such as higher interest rates and a lack of concessions in times of financial difficulty, or irresponsible debt restructuring, and/or;  
• Finance governments that systemically violate human rights and perpetrate crimes against humanity.  

While countries have the ultimate duty to protect human rights, investors can impact human rights and have a responsibility to respect them in their operations and value chains. Yet the UN Working Group on Business and Human Rights finds that many investors fail to connect human rights standards and due diligence with responsible investment practices. The PRI (Principles for Responsible Investment) adds that few sovereign debt investors recognize how their investments impact human rights or the resulting material risks to their portfolios.  

While some sovereign bondholders set human rights expectations for debtors and engage governments on issues like deforestation impacts on Indigenous Peoples, the majority fail to do so. This is due to several challenges, including perceived encroachment on sovereignty, limited leverage compared to corporate stocks and bonds, and potential reputational backlash from cutting government funding.

When governments can no longer afford interest payments, debt restructuring agreements may lead to further cuts in spending on essential services for the population, exacerbating socio-economic inequalities and undermining human rights. A study of 19 sovereign debt restructurings in 13 countries (Barbados, Belize, Chad, Côte d’Ivoire, Ecuador, Grenada, Greece, Jamaica, Mongolia, Mozambique, St Kitts and Nevis, Seychelles, and Ukraine) found that investors often ignore the human rights situation in debtor countries during negotiations, requiring countries to make financial decisions that may limit their ability to meet human rights obligations.  

Despite these findings, the UN Guiding Principles on Business and Human Rights (UNGPs), Organisation for Economic Co-operation and Development‘s guidance on responsible business conduct for institutional investors, and EU-wide regulations outline processes for investors to respect human rights. In turn, the 2011 UN Guiding Principles on Foreign Debt and Human Rights focus on debt repayment and countries’ fiscal capacity to uphold human rights, urging lenders to conduct due diligence to ensure that the loans do not impair the borrower’s ability to fulfill human rights. These provide the foundation for investors to embed human rights considerations into their strategies and more effectively account for the implications of their sovereign investments. 

Recommendations for investors 

BSR recognizes the challenges sovereign investors face in addressing human rights in their sovereign bond portfolios. BSR encourages investors to take the following steps to align investment practices with the UNGPs and other relevant human rights standards:  

1. Embed human rights in investment practices. This involves integrating human rights considerations into investment policies and processes, publishing a human rights policy, and communicating expectations to bond issuers and affected stakeholders.

2. Assess the country’s context and human rights profile before investing and continuously thereafter, including during debt restructuring negotiations.

• Understand the debtor’s human rights performance, the strength of the rule of law, and the socio-economic context. Use credible human rights indicators and data from reputable sources like the UN’s Universal Human Rights Index and the Human Rights Measurement Initiative while seeking input from affected stakeholders.
• During debt restructuring, assess how negotiating positions may impact the debtor’s capacity to meet human rights obligations and avoid exceeding the human rights debt tolerance threshold. 

3. Use leverage to influence behavior changes among debtors. While sovereign bondholders have less influence than equity investors, multiple opportunities exist:

• Raise human rights considerations with governments,emphasizing the importance of tax and social spending, and strong democratic institutions attracting foreign investment. Creating lending conditions tied to sovereign human rights performance may be possible.  During the Spring Meetings, participants highlighted the need for transparent, accountable sovereign debt decisions and empowering parliaments, civil society, and citizens to align borrowing with public interest.
• Participate in debt relief programs and restructuring negotiations in good faith, including through a formal social dialogue. Avoid predatory or obstructive behaviors that limit governments' efforts to fulfill human rights obligations and seek debt agreements that are financially sustainable and respect human rights cognizant of the country’s context (e.g., see proposal under the Debts of Vulnerable Economies Fund Principles).  
• Influence and collaborate with peers to increase leverage over debtor countries. Communication between asset owners and managers regarding their expectations of debtor countries will raise awareness of this important topic in the industry.  
• Consider taking a human rights-based approach to divestment if the leverage methods discussed above are not effective. Sovereign investors would need to consider the potential negative impact of divestment on human rights within the country. 

Given the complexities of sovereign debt investment, it is important to anticipate regulatory and stakeholder expectations, including national and regional legislative developments in the EU and elsewhere that seek to ensure responsible business and investment strategies uphold human rights. Please contact us to learn more about BSR’s approach to helping your company navigate human rights and sustainability opportunities and challenges associated with sovereign debt. 

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Merry Samuel

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Merry works with BSR member companies and internal teams to ensure quality membership communications and delivery of relevant content, events, advisory services and opportunities to collaborate. She also supports membership strategy, recruitment, engagement, and delivery to ensure communications and campaigns align with current and prospective member needs.

Prior to joining BSR, Merry was a Market Development Associate at the International Foundation for Valuing Impacts. She developed marketing and educational content, communicating the value proposition of impact valuation methodologies to sustainable business leaders. Merry also worked as a Senior Analyst at a global development and implementation firm, Resonance Global, where she supported public-private partnerships and activities between global development agencies and Fortune 500 companies to advance the SDGs. Through her prior experience at various global development firms and nonprofits, Merry brings over five years of experience in relationship management, business development, and project management.  

Merry holds a B.A. in International Affairs from George Washington University, where she concentrated on international development.  

Reports | Thursday May 15, 2025

BSR Climate Scenarios 2025

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2024 was the warmest year on record, with a global average surface temperature of more than 1.5°C above pre-industrial records. As climate risks intensify, the need for credible, science-based scenario planning has never been greater.

BSR’s climate scenario narratives draw on a range of temperature pathways and integrated climate-economic models to evaluate both physical and transition risks. Our decade-by-decade assessments help organizations translate complex climate data into actionable insights, supporting more transparent climate risk disclosures and more resilient, forward-looking business strategies. By aligning with the global transition to a low-carbon economy, companies can not only mitigate risk but also unlock emerging strategic opportunities.

Blog | Wednesday May 7, 2025

Omnibus: The Costs of Looking Away from Sustainability Impacts in Uncertain Times

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Nicci Hong

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Nicci supports BSR member companies across industries in respecting human rights across their organizations. Her primary areas of expertise include human rights in Southeast Asia and forced labor issues in global value chains.

Prior to joining BSR, Nicci worked as an associate and independent contractor, providing advisory services on addressing labor rights violations and the implementation of business and human rights standards.

Nicci graduated magna cum laude with a Master's in Management and a concentration in Corporate Social Responsibility from Louvain School of Management in Belgium. Nicci also holds a B.A. in Global Political Economy from Waseda University in Japan, and her degree focused on poverty and socioeconomics.

Blog | Tuesday May 6, 2025

The EU AI Act: Where Do We Stand in 2025?

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The European Union’s Artificial Intelligence Act (EU AI Act) is the most significant piece of legislation in the world regulating artificial intelligence. In 2024, we published a two-part series on the AI Act looking at what it means for businesses and recommendations to help companies start preparing. Twelve months on, this new blog post looks at the status of the AI Act—both in terms of provisions that have come into force and those yet to do so—as well as potential changes to the AI Act in the future. 

What is the status of the EU AI Act? 

The EU AI Act officially entered into force in August 2024; however, the provisions did not immediately apply. Instead, the legislation took a staggered approach, with different requirements coming into force at different times over a three-year period. 

The first provisions to come into effect, on February 2, 2025, prohibited certain AI practices. Most concerned more hypothetical uses of AI, rather than ones that were widespread within the EU, such as the use of AI with manipulative or deceptive techniques aimed at changing people’s behavior to cause harm, or the use of AI to predict the likelihood of a person committing a criminal offense. Many others focused on AI that might be used by government actors, including law enforcement agencies, rather than by the private sector.  

A provision that is more relevant for companies prohibits the use of AI systems to determine or predict people's emotions in workplace settings, with exceptions for safety reasons, where commercially available software that can do this already exists. In February 2025, the EU Commission published guidelines on these prohibited AI practices. These provide further clarity on all prohibited AI practices, including workplace emotional detection or prediction (e.g., clarifying that “emotions” does not include gestures, facial expressions, or whether a person might be in pain or tired). Companies using any sort of technology or software that determines or predicts people’s emotions should have stopped this already, or risk fines of up to €35 million or 7 percent of global annual turnover of the preceding year, whichever is higher. 

None of the remaining provisions are yet in force, and the next set of requirements to come into force will not do so until August 2, 2025. First, EU member states will at that point need to designate the independent organizations (“notified bodies”) responsible for assessing the conformity of high-risk AI systems before they can be placed in the EU market. 

Second, there will be new rules for General-Purpose AI (GPAI) models, namely models (like large language models) that can be adapted to a wide range of tasks. Providers will need to keep up-to-date technical documentation, provide information and documentation to downstream providers integrating models into their own AI systems, establish a policy to respect EU copyright law (particularly regarding training data), and publish a detailed summary of the content used for training. Additional, more stringent obligations will apply to GPAI models identified as having systemic risks, defined as including “actual or reasonably foreseeable negative effects on...fundamental rights.” These include requirements for model evaluation (e.g., identifying and mitigating systemic risks), assessing and mitigating possible systemic risks, ensuring adequate cybersecurity protection, and reporting serious incidents.

Third, the EU will establish an AI Office and European Artificial Intelligence Board to oversee the enforcement of the legislation, and each member state will designate a national authority with the competence to enforce the legislation at the national level.

After this, the third wave of requirements will come into force on August 2, 2026. These cover a broad range of areas, including measures to promote innovation (such as regulatory sandboxes, where innovators can test new products or services in a controlled environment under the supervision of regulators) and the establishment of an EU database of high-risk AI systems. Two requirements in particular will be important to companies. 

First, there will be new requirements on transparency aimed at ensuring that individuals are aware when they are interacting with AI. These include informing people interacting with AI systems (e.g., chatbots) that they are doing so, labeling synthetic content generated by AI (such as text, images, video or audio) as well as deepfakes, and ensuring that individuals subjected to emotional recognition or biometric categorizations are informed. These requirements will be particularly relevant for companies using emotional recognition or biometric categorizations outside of the workplace (such as in stores) or creating content using generative AI. 

Second, the AI Office and member states will encourage and facilitate the development of codes of conduct for AI systems that are not high risk. While voluntary, these will aim to encourage the adoption of similar measures that would be taken for high-risk systems, including the ethical development and use of AI, and assessing and minimizing the environmental impact of AI systems. Companies looking to position themselves as leaders when it comes to responsible AI may want to ensure compliance with these voluntary codes of conduct.  

The final requirements will come into force on August 2, 2027. These relate solely to high-risk AI systems, which include biometrics and the use of AI in critical infrastructure, education and vocational training, employment, essential private and public services, law enforcement, and the administration of justice. For these, there will be a range of requirements relating to their development, including establishing risk management systems, maintaining technical documentation, and ensuring accuracy and robustness, as well as human oversight. There are also rules relating to placing these systems in the EU market, putting them into service, and using them, such as establishing quality management systems, keeping documentation, cooperating with national authorities, and complying with conformity assessments. Part two of our series last year highlighted the many ways that the requirements for high-risk AI systems necessitated a human rights-based approach, with many of the requirements explicitly incorporating consideration of potential risks to human rights posed by the system. 

Might anything change? 

The EU has shown itself willing to modify even recently adopted regulations when faced with pressure by EU member states and other stakeholders. Notably, a range of sustainability-focused regulations are likely to be amended, limiting their applicability, scope and requirements, through the Omnibus Simplification Package. 

In recent months, there have been similar calls for the EU’s AI Act to be amended to reduce its requirements. The new U.S. administration has been critical of much of the EU’s regulation of technology given the impacts they have on U.S.-based technology companies. While the EU has not made any formal statements on whether amendments to the AI Act are planned, the EU Commission has indicated that there will be a public consultation on challenges in the Act’s implementation process, a “fitness check” on legislation in the area of digital policy, and a “simplification digital package” by the end of 2025. Depending on the outcome of the consultation and the “fitness check,” it is possible that amendments could be made to the AI Act, either removing requirements or the scope of companies who need to comply or extending existing deadlines to give more companies to prepare. 

For more information on the AI Act or to discuss its implications for your business, please contact our Tech and Human Rights team. 

Blog | Wednesday April 30, 2025

A Message from Aron Cramer, BSR President and CEO

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The world is experiencing a staggering degree of change and uncertainty right now.

Some have said that this is not no longer an era of change, it's a change of eras.

No organization amidst all of this change has all the tools that they need in their toolbox and I'm convinced that BSR is most helpful for companies when we not only bring to bear what our amazing team of almost 200 people bring, but also work within the broader ecosystem so we can bring together complimentary resources and perspectives, and networks to help companies make progress at a time of great headwinds.

Business leaders succeed when they have a sense of vision. And a vision forward, not just for 2025, but for well beyond, has to be about companies that take their impacts on society very seriously, has to take seriously the challenges that they will face if our environment does not deliver the kinds of natural resources that we need to use and need to use wisely, and ignores the intersection of business and society. Put more positively, these are all things that create massive opportunities for innovation, massive opportunities for strategic advantage, and massive opportunities to ensure resilience at a time when the change is so intense, resilience is not just a buzzword, it is an absolutely essential value that companies really need.

The best way through the current environment, which indeed is challenging, is together.

The best way through the current environment, which indeed is challenging, is together. And so, we look forward to working with you, to hearing from you, to devise solutions, figure out new collaborations, and make sense of this world together, because that has always been the way that BSR has been the most valuable and I believe it is exactly the right model for us to work towards together in this moment.

Blog | Wednesday April 30, 2025

Board Oversight Amid Uncertainty: Doubling Down on Strategic Sustainability

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Blog | Thursday April 24, 2025

Climate and Nature Integration 101: In Conversation with Helen Crowley

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Lara Birkes, Managing Director of BSR's Climate and Nature team, connected with Dr. Helen Crowley, BSR Advisor and Global Business and Biodiversity Expert, to explore why integrating climate, nature, and people is no longer optional—and how systems thinking, organizations shifts, and even nature itself can help businesses navigate complexity, build resilience, and scale impact. 

Why is an integrated approach to climate and nature important? Why does it matter, and why does it seem particularly relevant now? 

We are facing interconnected challenges—economic, societal, and environmental—that require an integrated, systems thinking approach. Historically, siloed approaches were easier, but today’s complex systems demand holistic solutions. An integrated approach is not only relevant because of the global environment, but also because it shows how single actions can deliver multiple benefits. By considering climate, nature, business, and people, we can achieve greater cost effectiveness and efficiency. 

Do you know why these disciplines have evolved separately? Could you share some context? 

The climate community took hold with clear climate science and solutions such as renewables about five years ago. However, in 2019-2020, there were discussions about how to get nature in the decision-making process. Environmental science was relatively new and had a more traditional, NGO-driven focus, whereas the climate community had already gained momentum. Over time, reports like the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services and World Economic Forum emphasized the critical role of nature, helping bring it into the broader conversation. 

Today, there is growing recognition that the entire economy depends on nature, and the focus is shifting toward integrating nature with climate action. The separation between these areas existed due to campaigning approaches and organizational structures, but now there's a push to bring them together, as it makes sense for efficiency and carries multiple benefits. 

What does integration look like from an operational and tactical perspective? What about from a product development and R&D perspective? 

Even under less than ideal circumstances, integrating nature and climate strategies is possible. 

Many companies already have separate climate, nature, or water strategies, and that’s fine. What’s important is to integrate approaches, actions, and tactics moving forward, to deliver multiple outcomes.  

If you were starting from scratch, I’d recommend developing an integrated strategy focused on building resilience and addressing both impacts and dependencies on nature and climate. Tactically, it’s key to identify where technological solutions are important, useful, and can deliver benefits. Tactics for nature-related outcomes that can also address climate issues are a crucial part of this as well. Building on existing efforts and consistently applying a nature lens to climate work will indeed make the integration smoother over time. If you're doing types of disclosure for climate-related financial risk, you can do it for nature-related risk. I know it may seem overwhelming, but build on what you have and regularly reflect: am I applying a nature lens to my climate work, or vice versa? It’s likely easier than it seems. 

The key is connecting the dots and understanding how to bring these efforts together, rather than feeling overwhelmed by the challenge. While many companies have climate strategies and targets in place, there is also a growing curiosity around nature. How do we assess what's already in place?  

I think it's fun to play around with interconnectedness. If I'm looking at deforestation, how is that tangibly addressing my climate goals? How is that tangibly addressing my nature goals, or building natural resilience or natural infrastructure? Whatever it is, however you frame it, I think you’ll find that when you start making those logical lines between the different points, it becomes clear. Embrace the complexity! 

What are the challenges and opportunities of de-siloing climate, nature, human rights, and just transition work? 

Let’s talk about the system we’re part of. For example, we hear that we’ve received US$120 billion for nature financing. We need at least US$200 billion, with an additional US$500 billion to US$1 trillion annually to counteract the negative pressures on nature.  

Yet US$7 trillion goes annually into activities that degrade nature, within a global economy of, let’s say, US$100 trillion—an economy entirely dependent on nature. This highlights a key issue: companies are under-resourced to address the complex interrelations of climate, nature, and people. There are more powerful case studies, data, and reflections emerging. We want to help build a resilient business that thrives and adapts to what is ahead. But to deliver on that, we need more resources. It’s not an intellectual challenge—we know what to do. The real challenge is securing the resources needed. This is not just about identifying what to do, but about reframing sustainability as a key part of our business growth strategy—an opportunity to push forward despite resource limitations. 

How much of this needs to be linked to a broader internal narrative, one that helps shift thinking beyond quarterly earnings and challenges the short-term mindset reinforced by our current global economic models, so that we can strike a better balance between short-term business demands and the long-term perspective required to address Earth system challenges? 

Great question. We know the system needs transforming, but it can’t happen overnight. So inside companies, it’s about taking logical steps, meeting short-term demands while embedding them in a longer-term strategy. Sometimes, that means using short-term wins as a "Trojan horse" to build momentum for deeper change. And that’s where narrative matters just as much as data: people want purpose-driven companies. Scenario planning helps too. For example, asking, "What does our business look like in a 1.5°C or 2°C world?" helps shape that longer-term perspective. 

I can imagine this may feel daunting, as if now we need to try to change the global economic paradigm—but there’s something refreshing about knowing we can start integrating these longer-term messages now, while also seeing tangible short-term action. 

As a biologist, I think there's no downside to focusing on nature. Unlike climate, which can feel overwhelming, nature is inspiring and positive. It's been around 3.8 billion years, and it has figured out a lot. Understanding nature allows for strong narratives and excitement within organizations. 

There is a growing optimism around nature, which integrates well with climate work and brings a refreshing shift in perspective.

What organizational or institutional changes do you think need to be implemented to better align climate, nature, human rights and just transition work within companies?  

Companies likely have various strategies for integration. One interesting approach has been the multiple capitals model, which uses a balance sheet to account for not just financial value, but also natural, social, and other forms of capital. There's a growing resurgence in this, especially around capital accounting. 

One of the best ways to integrate climate, nature, and people is to get into the field, whether it's a cotton field, grazing system, or mining operation. Understanding how it all works in practice allows you to build a science-based narrative. You can then focus on integrating a just transition, ensuring stakeholders are not an afterthought, and ensuring that ecosystem services are restored. Collaborating with local communities, especially indigenous peoples who steward 80 percent of the world's biodiversity, makes the whole process tangible and impactful. When making a decision, it’s important to consider whose perspectives and value systems are being included in the equation. 

The social license to operate is making a comeback, and it’s no longer just tied to mining. It’s about understanding your company’s role within the broader society and the social contract you have—not just with consumers, but with the community. It’s not just about how a company treats its employees, but also how it benefits those more broadly. When addressing nature and climate, businesses can clearly demonstrate their contribution to a broader societal value and building a sort of societal resilience. 

Shifting vantages for a moment. We both share an admiration and love for biomimicry, or learning from nature. If we were to learn from nature as practitioners of this work within companies, how would we approach integration? What can nature teach us at this important point of evolution for our work?  

Nature has been around 3.8 billion years, evolving and changing. Biomimicry describes life's principles, highlighting how nature’s resilience and power are achieved. When we talk about nature-based solutions, it’s not just a trendy term in the corporate world. It’s about harnessing nature's complexity to solve challenges it’s been addressed for millennia. By being locally attuned, building resilience, working within boundaries, and leveraging interdependencies, businesses can tap into the same strategies that have made nature so successful. Essentially, life's principles are not only key to nature’s success, but also to the success of companies seeking sustainability and resilience. 

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Dr. Helen Crowley

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