The Australia and New Zealand Banking Group (ANZ) violated global human rights standards by financing a sugar company accused of seizing land from Cambodian farmers, an Australian government body says.
In a complaint to the Australian National Contact Point (ANCP), which monitors corporate behaviour overseas, two rights groups had said ANZ and its Cambodian subsidiary had breached rights guidelines in lending to Phnom Penh Sugar Co. (PPS).
The advocacy groups, Equitable Cambodia and Inclusive Development International, said in their 2014 complaint that PPS forcibly removed families and took their land, intimidated villagers and used child labour in its operations.
Such actions violated an ethical business code set by the Organisation for Economic Cooperation and Development (OECD), which Australia endorsed, ANCP said.
"It is difficult to reconcile ANZ's decision to take on PPS as a client with its own internal policies and procedures, which appear to accord with the OECD Guidelines," the ANCP said in its final statement on the case.
The decision is part of a broader trend of companies coming under greater scrutiny for their actions overseas.
Differences in legislation and inadequate protections for workers and residents in poorer countries can lead to rights violations that foreign investors must be held responsible for, activists say.
But the ANCP said although it appeared that Cambodians had been "adversely affected" by the PPS, "what is less clear is the extent to which ANZ can be held responsible for any harm."
Hundreds of families forced off their land by PPS received little compensation, and continue to suffer nearly a decade on, said Eang Vuthy, executive director of Equitable Cambodia.
The ANCP's decision affirms that ANZ "should not have financed a company that was involved in a land conflict with thousands of local farmers," he said in a statement.
But "while this offers some measure of vindication for the families, it doesn't address their immediate situation, which remains desperate," he said.
The lender told the ANCP that it cut ties with PPS in 2014.
A spokesman for ANZ said the lender has acted on ANCP's recommendations, and that it had pushed PPS to clean up its operations.
"Phnom Penh Sugar left the bank after we sought to influence change," the spokesman told the Thomson Reuters Foundation.
"We regret we were not able to make more progress."
In their complaint, the rights groups said ANZ must use profits from the PPS loan to provide reparations to the 681 families, but the bank declined to do so, the ANCP noted.
While the ANCP was right to call out ANZ's "reckless behaviour", it failed in not pressing the lender to provide adequate redress for the damage caused, said Keren Adams at the Human Rights Law Centre, an Australian non-profit.
"This is ultimately just a slap on the wrist," she said.