Report Asks Investors To Respect Human Rights On Clean Energy Projects
This post was originally produced for Forbes.
Renewable energy projects are the primary weapon in the war on climate change, but that shouldn’t exempt these projects in the developing world from United Nations’ standards on human rights, argues a new briefing report.
As I explored the briefing, “Renewable Energy: Managing Investors’ Risks and Responsibilities,” with two of the co-authors, Andrea Armeni of Transform Finance and Meredith Benton (see my interview with them at the top of this article), I began to see clean energy projects through a new lens.
Armeni points out that when a wind or solar project is built to provide power to an aluminum smelter there is no question that powering the smelter with clean energy is better than powering it with fossil fuels, but there may still be a negative impact on a local community–which may or may not benefit much from the project.
He says that to ensure that the local community benefits from its participation in the project, the investors need to insist that the community be represented at the table from start to finish.
Andrea Armeni, Executive Director of Transform Finance
Benton adds that oftentimes communities being engaged in clean energy projects today, have been isolated in the past, perhaps because of what makes their land appealing today–lots of sun or wind. Without a history of making deals in the past, the community may not have the capacity to negotiate a fair and equitable arrangement. Investors should help ensure that this capacity is developed for the sake of the renewable energy project.
Mary Robinson, President, Mary Robinson Foundation, is quoted in the executive summary of the briefing saying, “It is not acceptable for any business to ignore their impacts on peoples’ land rights, security or livelihoods – the renewable energy sector is no different.”
Benton notes, however, that it is a wise strategy to engage with the community to create a fair transaction. Disenfranchised communities who may come to feel that a project in the community is a bad deal, could create a volatile situation that could be expensive to resolve. That is a risk that can be managed by engaging constructively with the affected community.
The briefing notes that the extractives industry has had to write off $379 million in assets due to “company-community conflicts.”
With global renewable energy projects totaling $$287 billion in 2016, there are a lot of projects happening. Falling prices for renewable energy technology and increasing demand for energy are likely to continue the trend of increasing investments in clean energy in the coming years.
Eventually, the report notes, the world will need to shift entirely to clean, renewable energy. To avoid having adverse impacts on the communities where the projects are built, the report recommends three specific steps for investors:
Prior to investment, ensure human rights due diligence is undertaken according to the UN Guiding Principles on Business and Human Rights.
During the investment, monitor human rights performance and engage with companies to encourage them to comply with the UN standards. If companies fail to comply, the briefing suggests the investors divest.
Both prior to and during investment, engage not only with the companies but also with community representatives such as local governments, trade unions, nonprofits and others in the community to ensure that human rights are respected.
While there is little argument that renewable energy projects provide a meaningful social benefit that accrues disproportionately to low-wealth communities being adversely impacted by climate change, the briefing makes a compelling argument that the communities impacted directly by them should be considered and consulted actively throughout their development and operation.
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