Major venture capital (VC) firms and accelerator programmes involved in funding and developing technology businesses have failed to implement adequate human rights due diligence processes, which means their investments could be contributing to abuses around the world, claims Amnesty International.
In its first-ever review of venture capitalists’ human rights responsibilities, Amnesty surveyed every firm on the Venture Capital Journal’s list of the 50 largest VCs, as well as high-profile tech accelerators Y Combinator, 500 Startups and TechStars.
It found that none of the 10 largest VC firms – which together have raised more than $82bn over the past five years – had adequate human rights due diligence policies in place.
“Our research has revealed that the vast majority of the world’s most influential venture capitalist firms operate with little to no consideration of the human rights impact of their decisions,” said Michael Kleinman, Silicon Valley director of Amnesty Tech. “The stakes could not be higher – these investment titans hold the purse strings for the technologies of tomorrow, and with it, the future shape of our societies.”
Of the 50 VC firms and three accelerators surveyed, only one – Atomico – had due diligence processes in place that could potentially meet the standards set out by the United Nations’ (UN) Guiding principles on business and human rights.
To meet these standards, the UN principles establish that companies and investors must take proactive and ongoing steps to identify and respond to the potential or actual human rights impacts of their investments.
According to Amnesty, “simply having a policy on paper is not sufficient”, and a human rights due diligence process must include: embedding responsible business conduct into policies and management systems; identifying and assessing actual and potential adverse impacts associated with the enterprise’s operations, products or services; ceasing, preventing and mitigating adverse impacts; tracking implementation and results; communicating how these impacts are addressed; and providing for remediation when appropriate.
Where human rights impacts are outside the direct control of the firm, the UN principles require them to exercise leverage, or otherwise seek to improve their leverage, to mitigate the abuse. The human rights due diligence responsibilities of corporate actors are described in principles 17 to 20 of the UN document.
Although two of the top 10 VC firms – Insight Partners and Norwest Venture Partners – did conduct some level of human rights due diligence, Amnesty said their processes did not meet the standards set out in the UN principles, while eight firms showed no evidence whatsoever that they checked whether their investments could be linked to human rights abuses. These were NEA, Tiger Global Management, Sequoia Capital, Lightspeed Venture Partners, Andreessen Horowitz, Accel, Index Venture Partners and General Catalyst.
The Amnesty report noted that VCs usually devote substantial resources to conducting due diligence on other aspects of their potential investments, with the average deal taking 83 days to close and the average firm spending 118 hours scrutinising and evaluating the proposition.
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According to Amnesty, the “almost complete lack of any human rights due diligence processes” has three significant impacts.
The first is that VC firms may invest in companies whose products and services are implicated in human rights abuses. One example the report gave was AnyVision, a facial-recognition company backed by the US-based Lightspeed Venture Partners, which assists the Israeli government in its military surveillance of Palestinians throughout the West Bank.
The second impact is that the clear harms posed by specific business models are ignored. This includes the surveillance-intensive business models of VC-backed companies such as Facebook, Google, TikTok and others, which “requires the companies to collect ever more – and ever more personal – data on their users” and represents an “unprecedented interference with the right to privacy” that cannot be compatible with human rights, said Amnesty.
“Similarly, venture capitalists continue to support companies that rely on app-based or ‘gig’ workers, who often face exploitative or otherwise abusive work conditions,” it added.
The third impact is that, as long as the technologies promise a positive return on investment, VC firms are more likely to fund companies developing new technologies that have a significant negative impact on human rights.
“Of particular immediate concern is the growing number of startups developing and applying artificial intelligence [AI] and machine learning tools across a wide variety of sectors without first ensuring that this technology does not have discriminatory impacts,” said Amnesty, adding that if AI models are built on historical data, they could end up amplifying, rather than ameliorating, various equality gaps in society.
Kleinman added: “A lack of human rights due diligence means venture capitalists are turning a blind eye to whether their investments are contributing to human rights violations.
“VC firms cannot act like they are above the law. Like all companies, they have a responsibility to carry out due diligence in order to identify, prevent and mitigate any adverse human rights impacts of their investments.”