Complexity is no excuse for inaction

By August 10, 2020News

By Kevin Thomas, SHARE CEO

When we were developing our new framework for evaluating accountability for Indigenous rights within investment chains, the word “complexity” felt like an understatement.

On the investment side, energy and mining investment chains are getting more complicated. Often numerous corporate entities and relationships exist between the investors who provide capital and project operators who are responsible for what happens on the ground. This kind of complex intermediation can muddy the waters regarding who is responsible for critical relationships with the Indigenous communities affected by or participating in a project. On the community side there are often many different governments, jurisdictions, legal systems, business partners and others involved.

For investment decision-makers, that complexity makes it challenging to assess how well companies respect Indigenous rights and manage relationships with Indigenous governments and communities.

Yet the duty to respect what are now well-defined Indigenous rights in international law still remains, for companies and investors alike. And it’s not just a duty: there are clear benefits for companies and investors to develop a mature, respectful and productive relationship with Indigenous governments, communities, businesses and employees. Conversely, of course, the financial consequences of failing to adequately address these rights can be substantial, with growing recognition of those rights in legislation, court decisions and international standards that apply to projects and investment decisions.

For all this complexity, there are some fairly basic underlying principles.

  • First, that these rights are actually well-defined in international law, and that the UN Declaration on the Rights of Indigenous Peoples should form the backbone of any Indigenous rights policy at the corporate or investor level. That means we should be cautious when organizations refer to less stringent standards or attach caveats to core rights.
  • Second, that whatever the business or investment structure, the acknowledgement of these responsibilities has to be incorporated into those arrangements, and accountability for implementation set out in contracts, covenants or other frameworks.
  • Third, there needs to be some means of grievance and redress if Indigenous rights due diligence is going to work.
  • And lastly, that if we’re not getting the right information about all of this from those responsible for the project, we need to ask for it.

SHARE’s latest investor brief, Energy and Mining Investment: Assessing Accountability for Indigenous Rights in Complex Investment Chains, outlines how accountability for Indigenous rights can become dispersed when projects extend the distance between investor decisions and project operators through mergers and acquisitions, minority shareholdings, joint ventures, royalty arrangements and other complex business relationships. Funded by and developed with Canadian independently-owned asset manager Leith Wheeler, the report should help asset managers and asset owners untangle that web of complexity and apply consistent expectations within their own investment chain.

As our report concludes, complexity is no excuse for inaction. There are models of companies doing this right, just as there are examples where we got it wrong. Let’s learn from both of those and do better.

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