Indigenous Risk for Complacent Companies

Mining, oil and gas companies working on project sites worldwide remain poorly positioned to manage work on Indigenous lands, posing high risk to shareholders and investors, according to new research.

First Peoples Worldwide, an Indigenous-led organisation that builds upon a foundation of Indigenous values and rights, recently released the Indigenous Rights Risk Report, which analysed 52 U.S. oil, gas, and mining companies with projects operating on or near Indigenous territories around the globe, impacting some 150 Indigenous communities.

Projects were assessed against five indicators (Country Risk, Reputation Risk, Community Risk, Legal Risk, and Risk Management) to determine their risk of Indigenous community opposition or violations of Indigenous Peoples’ rights.

92 per cent of project sites posed a medium to high risk to shareholders and investors. Yet only five of the analysed companies had an Indigenous Peoples policies to guide the company for how to positively engage and work with Indigenous Peoples.

The research showed that the vast majority of companies and projects were exhibiting suboptimal efforts to establish positive relations with Indigenous communities overall, with 92 per cent of the companies assessed not addressing community relations or human rights at their board level in any formal capacity.  

The report said that while the connection between a company’s financial and social performance was gaining broader recognition from the business community, analytical processes for identifying and evaluating social risks were far from refined.

“Informational loopholes limit the financial sector’s ability to comprehensively manage social risks. Besides the obvious implications this poses for individual investors, it perpetuates a broader phenomenon in which capital flows are prevented from rewarding companies that pursue strong community relations and respect human rights, and penalizing companies that do not,” the report said.

The research also ranked countries based on the risks posed to indigenous people, with the report showing that poor governance and negligible policies for Indigenous peoples in host countries was bad for business.

Australia was ranked in the lower risk second tier, assessed as being riskier than New Zealand and Greenland but less risky than the United States and Norway.

Nearly 60 per cent of all projects operating in high-risk countries were rated as high risks themselves.

“Indigenous Peoples are securing unprecedented recognition of their rights from governments, but these impressive legal gains are matched with chronic gaps in implementation, especially as they relate to resource extraction,” the report said.

“It would be problematic for Indigenous Peoples to rely exclusively on governments to protect their rights from the private sector, when governments have a sustained record of violating Indigenous Peoples' rights themselves.

“Using market forces to financially incentivize business practices that respect Indigenous Peoples' rights – including Free, Prior, and Informed Consent – presents opportunities for communities to exert powerful leverage over companies operating on or near their lands.

“In the absence of market incentives for proactively addressing social risks, companies are not prompted to do so until things go wrong, and social risks become social costs.”

View the full report online at http://firstpeoples.org/indigenous-rights-risk-report.