A Sustainable Investment in Journalism

A sustainable business requires diverse revenue streams. ESG Investor now operates a subscription service as of Tuesday 14th May. To find out more please get in touch with our subscription team on subscriptions@esginvestor.net

Commentary

Indigenous Rights: A Guide for Investors

Moira Birss, Climate Finance Director at Amazon Watch, outlines why investors should recognise the importance of Indigenous rights due diligence.

The United Nations’ (UN) Declaration on the Rights of Indigenous Peoples was adopted nearly 25 years ago, and academic studies regularly demonstrate the central role that Indigenous peoples play in climate change mitigation and biodiversity protection. Yet most investors, even ESG-focused ones, have done little to incorporate Indigenous rights due diligence into their investment analysis and practices. 

That’s finally beginning to change, however, and none too soon. Though the ‘green transition’ is an important answer to the climate harms of the fossil fuel industry, there’s no guarantee that ‘green’ industries won’t replicate its human rights abuse legacy. In fact, data from the Environmental Justice Atlas shows the mining sector as having one of the highest occurrences of assassinations, physical violence, and criminalisation of land defenders, particularly where Indigenous peoples were affected. And estimates show that around 54% of “energy transition mineral projects” are located on or near Indigenous lands.

Investor recognition

Fortunately, investors are finally beginning to recognise the importance of Indigenous rights due diligence, whether driven by regulatory developments, stakeholder demands, investor recognition of the relationship of Indigenous rights to nature protection, or the financial risks arising from inadequate due diligence.   

BlackRock, the world’s largest asset manager, noted in its March 2023 investment stewardship guidelines, that “companies whose operations impact Indigenous Peoples’ lands and legal rights, a failure to obtain, in advance and on an on-going basis, free, prior and informed consent (FPIC) from those Peoples may expose companies to increased legal, reputational or regulatory risk, in light of various local and international laws and norms governing these relationships”.

At Citigroup’s annual general meeting of shareholders, nearly a third of shareholders voted in favour of a resolution calling for a report on the effectiveness of bank practices, policies, and performance indicators in respecting Indigenous Peoples’ rights in the bank’s existing and proposed general corporate and project financing. A similar resolution last year received comparable support. 

These resolutions came in response to the fact that, in recent years, Citi has provided financing for projects and companies that clearly abuse Indigenous rights. Citi was the lead financier of the Dakota Access Pipeline in 2016, providing over US$5 billion to Enbridge, enabling the Line 3 and Line 5 pipeline, and helped GeoPark secure over US$650 million for oil drilling in the Colombian Amazon despite a lack of consent from local Indigenous peoples and a clear history on behalf of the company of damaging Indigenous lands, health, and livelihoods. 

Insufficient depth

However, even as investor recognition of the importance of Indigenous rights due diligence increases, most standards and guidance on social or environmental matters used by investors rarely address Indigenous rights in sufficient depth. This implementation gap is demonstrated by the experience of Indigenous peoples, who increasingly experience human rights abuses related to business activities, particularly in relation to the extractive, renewable energy, and agribusiness sectors, as documented by the UN Working Group on Business and Human Rights.

Failure of investors to understand Indigenous peoples’ rights also ignores material business risks, which have already cost investors and companies billions in cost overruns, delays, and project cancellation, in addition to reputational damage.

Take the case of GeoPark. The South America-based oil company reported over US$70.8 million in investment after a failed oil project in the Peruvian Amazon, where Achuar and Wampis communities had vehemently opposed oil companies for decades and launched protests and lawsuits against GeoPark’s exploration attempts.

Amazon Watch has produced and published a new toolkit for institutional investors on Indigenous rights. ‘Respecting Indigenous Rights: An Actionable Toolkit for Institutional Investors’ aims to bridge that gap and provide investors with tools to learn about and incorporate Indigenous rights into due diligence and investment stewardship activities, and to foster respect for Indigenous peoples’ rights.

The toolkit, which includes contributions and input from Indigenous human rights specialists, investors, and NGOs working on the intersection of business and human rights, provides actionable steps for institutional investors, including asset owners (such as pension funds and insurance companies) and asset managers, on how to carry out Indigenous rights’ due diligence.

The toolkit builds on international human rights and environmental law standards and jurisprudence; a wider framework on the business responsibility to respect human rights, including but not limited to the UN Guiding Principles on Business and Human Rights, the OECD Guidelines for Multinational Enterprises, the UN Declaration on the Rights of Indigenous peoples (UNDRIP), emerging international legal frameworks, jurisprudence; and an emerging body of Indigenous peoples’ own laws, protocols, and standards related to business conduct.

Material business risks

When investors fail to understand and respect Indigenous peoples’ rights, they not only risk reputational damage but also ignore material business risks, which can cost companies and investors billions in cost overruns, delays, and project cancellation. BlackRock recently recognised that companies’ failure to obtain and maintain free, prior, and informed consent from impacted Indigenous peoples can lead to financial risk.  

But recognising the risk and taking steps to mitigate it are two different actions. Amazon Watch’s new toolkit lays out a path. Now it’s up to investors to walk it.

Emil Sirén, Associate at Ethos, a sustainability-focused management consultancy firm, co-authored the article and collaborated with Amazon Watch to create its new toolkit. 

The practical information hub for asset owners looking to invest successfully and sustainably for the long term. As best practice evolves, we will share the news, insights and data to guide asset owners on their individual journey to ESG integration.

Copyright © 2024 ESG Investor Ltd. Company No. 12893343. ESG Investor Ltd, Fox Court, 14 Grays Inn Road, London, WC1X 8HN

To Top
Share via
Copy link
Powered by Social Snap