Understanding and respecting indigenous rights during the low-carbon transition

Ten important questions investors should ask as resource companies pursue the necessary materials for a sustainable future

Despite representing just five percent of the world’s population, Indigenous people protect close to 80% of the planet’s biodiversity as well as own, occupy or use 25% of the planet’s surface area.¹ This has significant implications for our energy transition. To reach the goals of the Paris 2015 Agreement, we require a rapid expansion of renewable energy, as well as significant increases in the production of critical minerals to manufacture electric vehicle batteries, wind turbines and solar panels. But many land-use projects to advance these initiatives intersect with the territorial rights of Indigenous peoples. Subsequently, energy transition goals will only be achieved through enhanced human rights due diligence and partnerships with Indigenous communities and land stewards the world over.² While practices in these areas are improving, progress remains slow.

Improving due diligence

In their 2021 Renewable Energy & Human Rights benchmarkthe Business and Human Rights Center analyzed 15 of the world’s biggest global renewable energy companies. Despite some modest year-over-year improvements, the entire sector continues to underperform on human rights due diligence. The average benchmark score was 28% with the lowest scores stemming from the sector’s highest-risk areas – respect for land rights, Indigenous peoples’ rights, and protections for human rights defenders.

International Day of the World’s Indigenous Peoples is August 9th every year. In 2022, the theme was “the role of women in the preservation and transmission of traditional ancestral knowledge.” This focus aimed to amplify the distinct role Indigenous women play in advocating for land rights and defending against the adverse social consequences that Indigenous rights violations have on Indigenous communities and cultures over time. In Canada, the final report on the public inquiry into Missing and Murdered Indigenous Women and Girls has drawn a clear link between resource extraction and excessive violence against Indigenous women and girls and 2SLGBTQQIA+ people.³ The report made calls to action for industry and governments to practice greater due diligence in preventing and mitigating these negative impacts through enhanced socio-economic impact assessments and upholding principles like free, prior and informed consent (FPIC) as laid out in the Universal Declaration on the Rights of Indigenous People. Among other best practices, the Reconciliation and Responsible Investment Initiative has published high-level guidance for investors related to advocacy with investee companies on the specific concern of impacts from resource development on Indigenous women and girls.⁴

Respectful and equitable relationships

For responsible investors, obtaining and maintaining FPIC is considered essential. We expect companies to commit to obtain and maintain FPIC and in so doing mitigate risks to both people and businesses. FPIC can also simultaneously establish new opportunities for mutual benefit that otherwise might not be realized. In Canada, one of the most direct paths to achieving this objective is through facilitating Indigenous equity stakes in projects. Indigenous ownership can lay the foundation for more formal inclusion that ensures Indigenous perspectives are incorporated into leadership decision-making. Such collaboration can lead to significant benefits including but not limited to:

• Enhanced environmental protections through more formal processes for integrating Indigenous Traditional Knowledge for land stewardship

• Development of Indigenous own-source revenues

• Improved social outcomes for Indigenous communities

Implementing a new industry standard for resource development that is based on FPIC ensures respectful and equitable relationships with First Peoples that can benefit all Canadians, who after all, are reliant on the success of renewable energy and mining initiatives for a successful transition to a low- or no-carbon future. Equitable partnerships will significantly reduce legal risk, while increasing project certainty and overall progress toward sustainable energy infrastructure.

"For responsible investors, obtaining and maintaining FPIC is considered essential."

Actions over words

Although the Renewable Energy & Human Rights benchmark found that most companies in the global sector have in place existing commitments to FPIC, policy commitments do not always extend into practices on the ground. Rio Tinto demonstrated this in 2020 when they destroyed a 46,000-year-old Aboriginal cultural heritage site at Juukan Gorge in Australia to develop an iron ore mine. To help eliminate such Indigenous rights abuses, investors need to have a better understanding of the underlying practices and indicators of strong FPIC and human rights due diligence generally.

As part of our Social Equality Approach⁵ to ensuring responsible investment at BMO Global Asset Management, we are engaging internally with our Indigenous Banking Unit, Indigenous Advisory Council and externally with Indigenous rights holders, standard setters, and companies in the energy, mining, and renewable energy sectors to understand how we can help advance practices that respect Indigenous rights. At a minimum, companies need to increase their disclosure and transparency on human rights due diligence processes.

"...policy commitments do not always extend into practices on the ground."

What investors should ask

To understand how robust their public commitments to respecting Indigenous rights are in practice, there are 10 questions investors can ask renewable energy and mineral extraction investee companies:

1. How are Indigenous rights factored into the strategic business model and overall enterprise risk?

2. What steps are being made to facilitate and enable Indigenous equity ownership or other benefits in land-use projects?

3. What is the company’s explicit strategy for obtaining and maintaining FPIC for business activities that impact rights holders?

4. What is the chain of accountability up through the executive officers and board directors for ensuring effective implementation of FPIC principles?

5. What type of human-rights expertise or Indigenous-rights expertise is the board and senior management leveraging to inform the company’s approach?

6. What is the company’s contingency plan if FPIC hasn’t been granted?

7. What does the company define as consent, and with whom has consent been secured; are there any groups that have not consented and what is the approach to remedying this lack of consent?

8. Is the company able to provide transparency into contracts with Indigenous communities or disclose them in full, and if not, why?

9. Have rights-holders and other stakeholders been involved in the design and implementation of grievance mechanisms and other processes to help prevent and mitigate adverse impacts from business activities?

10. How does the company work with the local authorities to respect Indigenous rights when lands are not officially titled to the local Indigenous groups?

Listen and learn

Indigenous peoples are as diverse as any population group with differences of opinion about what is in their best interest arising from both within and between communities. With any best practice related to minimizing harm to affected people, what constitutes robust FPIC and a good relationship with Indigenous communities should be informed by what Indigenous communities themselves identify as being best practice. Effective engagement with locally affected rights holders to understand context specific protocols, interests and concerns is the foundation for respecting Indigenous rights.

Interested in learning more? For further reading, we recommend:

Reconciliation and Responsible Investment Educational Resources
First Peoples Worldwide’s FPIC Due Diligence Questionnaire
Responsible Mining Index 2022 Thematic Report
Corporate Human Rights Benchmark Methodology for the Extractives Sector