Olga Hancock, Head of Responsible Investment at the Church Commissioners for England, says investors must engage actively to support a truly just transition.
Climate change is manifesting before our eyes with extreme weather events leading to serious damage to nature, property, and people. That has given rise to a whole range of human rights issues: both directly, as people are hurt by the changing climate, and indirectly, as people are impacted by climate solutions.
When the United Nations Universal Declaration of Human Rights (UDHR) was made in 1948 in the aftermath of the horrors of the Second world War, climate change was the concern of a handful of scientists, far from the minds of the drafters of the UDHR. Even the right to a clean environment did not rate a mention, that concern would come later. And, as recently as 2015, the Paris Agreement only makes reference to human rights in its preamble.
As climate change accelerates, that is now changing.
In 2022, the UN Human Rights Committee ruled that Australia had failed to adequately protect Torres Strait Islanders from the adverse effects of climate change, and that the Islanders were entitled to compensation. This was the first time a state had been found in breach of the International Covenant on Civil and Political Rights for failing to adopt sufficient climate adaptation and mitigation measures to protect Indigenous People against rising sea levels.
While this case applies to state actors, investors need to be aware of companies‘ human rights obligations relating to climate change.
In the Netherlands in 2021, the Hague District Court ordered Shell to reduce its emissions by 45% by 2030, relative to 2019, including both its own emissions and end-use emissions. The decision cited the UN Guiding Principles on Business and Human Rights as a “global standard of expected conduct for all business enterprises wherever they operate”, arguing that the company was obligated to mitigate climate impacts because of the serious human rights risks for Dutch residents. While Shell has appealed the decision, the order is provisionally enforceable.
In June, UN experts sent a letter of concern to Saudi Arabian oil giant Aramco, saying its expansion of fossil fuel production and ongoing exploration threaten human rights. The UN also wrote to banks that finance Aramco’s business warning that their involvement could be in violation of international human rights law and standards.
For investors, the second set of human rights concerns related to climate change is the complex relationship of many climate solutions to human rights. Most of the world’s solar supply chain comes with concerns about modern slavery and other human rights violations. When we look at the sources of the minerals needed for the transition, many of these are on land under the custodianship of First Nations or Indigenous Peoples, giving rise to the application of Free Prior and Informed Consent. Nature-based solutions also give rise to similar human rights concerns where local or Indigenous communities are the custodians of the land.
How can we as investors make things fairer?
First, by actively engaging with companies. Especially with those who are not taking seriously their obligations to mitigate climate change, or who lobby against policies to mitigate climate change. And by taking appropriate escalation measures where this is not successful. Ultimately these companies are impacting the human rights of all of us and must be challenged.
Second, by doing their due diligence. Investors need to actively engage with investee companies to probe the human rights due diligence carried out in their operations and supply chains.
Finally, by encouraging reforms which enhance capital flows to climate solutions in emerging markets. This will give those countries more power to manage and mitigate their impacts, and helps put them on a pathway to clean development.
An active approach by investors on these issues has the ability to signal to policymakers the fact that investors understand the complexity of the issues and the intrinsic link between human rights and climate change as interdependent systemic risks. To support policy on one of these issues governments and investors must take the other seriously.