Cultural heritage is regarded as those special places, physically manifested as sites, monuments and building complexes that are considered important and deserving of special protection. These sites are central to individual and group identity, sustainable development, and the physical and spiritual well-being of communities. For this reason, most countries have laws to protect and manage heritage sites.
What is not as commonly known is that when financing projects, private-sector banks often impose further requirements on development proponents to safeguard cultural heritage. This is typically a consideration for jurisdictions where the effectiveness and application of host-country laws and regulations may not be adequate to mitigate project risk.
Financial institutions typically avoid projects that may have a significant adverse effect on cultural heritage as it creates unwelcome risk and can affect their reputation, lead to lawsuits, and result in financial losses. To mitigate this risk, financial institutions implement policies that include specific requirements for the consideration of cultural heritage in their deals. Unfortunately, the scope and application of these additional requirements is not consistent, and best practices have yet to emerge. To address this gap, a detailed review of cultural heritage in the lending practices of 25 of the world's largest private-sector banks was performed to better understand their approach and to recommend best practices.
Our research revealed that in addition to adherence to host-country heritage laws and regulations, all banks in our sample adopt some form of environmental- and social-policy framework which outlines internal and external expectations and requirements for the management of environmental and societal issues in the banks’ deals. This framework typically includes consideration of project effects on cultural heritage. Among the important features of these frameworks are sector-specific guidelines for certain industries or activities, and cross-sector guidelines or prohibited/restricted activity lists.
For industries or activities captured under these policies and guidelines, banks will not provide financing or will require enhanced environmental and social due diligence measures before agreeing to provide financing. Eleven (44%) of the banks examined in our analysis have cross-sector guidance for industries and activities that refer to cultural heritage protection, specifically with respect to UNESCO World Heritage Sites (WHS).
In addition, most financial institutions voluntarily adopt external standards for managing environmental and social issues. Our research identified two external standards, the Equator Principles (EPs) and ISO 26000 (Social Responsibility), along with one external framework, the United Nations (UN) Sustainable Development Goals (SDGs). Of the 25 financial institutions examined in this article, 22 adopt either the EPs or ISO 26000. Twenty-four (96%) of the banks examined in our study explicitly align their businesses with the SDGs.
Based on our review and analysis of the cultural heritage safeguard practices of private-sector financial institutions, we identified a number of areas which can be improved or standardized for greater consistency. Specifically, we recommended that each bank implement an Environmental and Social Policy Framework that includes the following elements:
- Recognition that host-country laws and regulations concerning cultural heritage will be followed
- Adoption of the Equator Principles
- A risk policy for UNESCO World Heritage Sites that includes:
- Equal consideration of natural and cultural heritage
- Prohibition on investments where WHS boundaries have been adjusted (i.e., reduced) to accommodate a project footprint
- Alignment of business practices with the UN’s SDGs - specifically, Target 11.4 and other culture-related targets
- Investment in activities that are compatible with the preservation and protection of cultural heritage
In addition to strengthening cultural heritage safeguards and adopting these proposed best practices, private-sector financial institutions are encouraged to seek opportunities that focus on cultural heritage as a means to set themselves apart from industry peers and to enhance their reputation and brand. This could include implementation of strong project safeguards, undertaking projects that are aligned with the SDGs, and the creation of impact investing opportunities such as the Museum Hotel Antakya in Turkey, that aim to generate positive heritage outcomes alongside a financial return.
Moving forward, research will be expanded to include the practices of systemically important (i.e., “too big to fail”) banks, export credit agencies and insurers to further understand how these institutions manage cultural heritage in their deals and to identify additional best practices. While private-sector banking and cultural heritage may seem to be an odd combination, it holds the promise to be a highly successful (and profitable) collaboration. It is hoped that this research serves as a catalyst and call to action for the adoption of robust cultural heritage safeguards and the UN’s SDGs by financial institutions.
In the eighth volume, first issue of Advances in Archaeological Practice, WSP’s Andrew R. Mason and co-author Meng Ying focus their research on financial institutions and provide an easy-to-understand summary of how cultural heritage management studies are undertaken in an international development context. The research also provides an overview of the importance of cultural heritage given large financial institutions’ influence over development projects. The article featured here is a summary of their work.
The full version of the research article is available here for download. Andrew also wrote a blog – “Too Old to Fail: Banking on Cultural Heritage” - describing the backstory to the Advances in Archaeological Practice article. That can be found at Cambridge Core, a platform featuring Cambridge University Press’s academic content.