New report finds that US extractive companies expose shareholders to risks by neglecting Indigenous Peoples’ rights

Colorado Springs, CO – On November 10, First Peoples Worldwide released the Indigenous Rights Risk Report at the SRI Conference on Sustainable, Responsible, Impact Investing, a product of two years of consultations with investment analysts, industry professionals, and Indigenous Peoples. The report analyzes 52 U.S. oil, gas, and mining companies with projects operating on or near Indigenous territories around the globe, impacting some 150 Indigenous communities. These 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. The report found that most of the U.S. extractive companies analyzed are poorly positioned to manage the risks they face when working on Indigenous lands. Furthermore, the Report shows that poor governance and negligible policies for Indigenous peoples in host countries is bad for business. Nearly 60% of all projects operating in high-risk countries were rated as high risks themselves. You can read the full report at http://firstpeoples.org/indigenous-rights-risk-report.

When analyzing risks associated with the operating country, companies’ reputation, the engaged Indigenous community, legal action, and risk management, the report found that 35% of the 330 projects assessed had high risk exposure, and 54% had medium risk exposure. Despite these risks, the vast majority of companies and projects are exhibiting suboptimal efforts to establish positive relations with Indigenous communities; 92% of the companies assessed do not address community relations or human rights at their board level in any formal capacity. Companies with high risk scores at 100% of their projects on or near Indigenous territories were Alpha Natural Resources, Kosmos Energy, Southwestern Energy, and Whiting Petroleum. Other companies with high risk scores at 50% or more of their projects on or near Indigenous territories were Anadarko Petroleum, Chevron Corporation, Continental Resources, Murphy Oil, Royal Gold, SM Energy, Southern Copper, and WPX Energy. A searchable database of the 330 oil, gas, and mining projects assessed under the new methodology is available on First Peoples’ website at: http://firstpeoples.org/wp/scorecards/.

FPW also analyzed risks associated with Indigenous recognition by host governments, land rights, and community consultation, demonstrating how resource-rich countries’ negligible or non-existent policies towards Indigenous peoples affect the companies that work within their borders. This is becoming increasingly evident in Canada, Indonesia, Ecuador, Peru, and other emerging resource economies. In 2013, a consortium of Canadian leaders (including industry representatives) warned that Canada is “heading for a gridlock in energy development that will rob the country of future wealth unless it can solve vexing environmental and Aboriginal conflicts.” Indonesia has become saturated with violent resource conflicts, with more than 2,230 Indigenous communities requesting investigations into violations of their land rights. Also in 2013, auctions for oil and gas concessions in Ecuador and Peru encountered both vehement opposition from Indigenous Peoples and “underwhelming” interest from companies – raising speculations that the Indigenous protests influenced companies’ decisions. Poor governance is bad for business – governments that disregard Indigenous rights are propagating volatile business environments that threaten the viability of investments in their countries.

Not only are Indigenous voices becoming louder, the media spotlight on Indigenous Peoples and resource extraction is shining brighter: 126 projects were exposed to negative attention from the media in 2014. Legal risks are also becoming more prominent, as legal protections for Indigenous Peoples’ rights around the world continue to strengthen. Indigenous community opposition is an especially perilous investment risk because Indigenous Peoples have the international legal framework for Free, Prior, and Informed Consent (FPIC) – the right for a community to give or withhold consent to projects that may affect their lands. Over the past several decades, Indigenous Peoples have secured 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. Using market forces to financially incentivize business practices that respect Indigenous Peoples’ rights – including the right to Free, Prior, and Informed Consent – presents opportunities for communities to exert powerful leverage over corporations operating on or near their lands.

First Peoples Worldwide is an Indigenous-led organization that builds upon a foundation of Indigenous values and rights to achieve a sustainable future for all. Our Keepers of the Earth Fund provides grants directly to Indigenous-led development projects. Since 2007, we’ve given $1.7 million in grants to hundreds of Indigenous communities across 58 countries. Our corporate engagement program makes the business case for respecting and upholding Indigenous Peoples’ rights through vigilant monitoring of corporate practices, affecting policy change, and advocating best practices in Indigenous community engagement.

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

Contact Katie Cheney at First Peoples Worldwide for media inquiries at (713) 560-6378 or communications [at] firstpeoples [dot] org

First Peoples Worldwide
877 Leeland Road
Fredericksburg, VA 22405
www.firstpeoples.org

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First Peoples Worldwide’ Indigenous Rights Risk Report Finds 94% of US Companies Ignore Rural Community Impacts

First Peoples Worldwide statement

11 November 2014

Extractive Industries neglect community engagement policies, increasing vulnerability of world’s rural poor

Recent community backlash against the Keystone XL pipeline, Indigenous protests against oil and gas concession auctions in Ecuador and Peru, and violent resource conflicts in Indonesia have all exposed extractive companies’ poor community engagement practices – and companies are doing nothing about it. A recent study from First Peoples Worldwide found that only 6 percent of publicly-held US oil, gas and mining companies utilize adequate risk management tools when working with communities, making people in rural areas increasingly vulnerable to extractive projects’ negative social and environmental impacts, and exposing shareholders to financial loss.

According to the Oxford Poverty and Human Development Initiative, 85% of the world’s poor live in rural areas. Simultaneously, rural areas are where extractive industries predominantly operate – and systematically ignore one of the most marginalized groups in the world. The Indigenous Rights Risk Report, a recent study released by First Peoples Worldwide at the 2014 SRI Conference on Sustainable, Responsible, Impact Investing, investigated 52 U.S. oil, gas, and mining companies with projects operating on or near Indigenous territories around the globe. While the report focused on Indigenous communities, it’s findings apply to all communities in which extractive industries operate – only 8% of companies had any policy that remotely addressed community relations or human rights.

The study examined 330 extractive projects, assessing companies’ risks based on five indicators: Country Risk, Reputation Risk, Community Risk, Legal Risk, and Risk Management. Companies’ community engagement risks were assessed in the Risk Management category, and were based on whether they had a board committee that addressed community relations or human rights, an advisory entity on community engagement, incentives for staff to pursue successful community relations, a public feedback mechanism, a formal agreement and consultation process with communities, whether they conduct Social Impact Assessments, and other indicators.

Only four companies (ConocoPhillips, ExxonMobil, Freeport-McMoRan, and Newmont Mining) had a board committee with community relations or human rights in its mandate, and among those, only Exxon Mobil has an active and independent external body to advise and evaluate its community relations or human rights performance. Most small extractive companies, including Alpha Natural Resources, Murphy Oil, and SM Energy, are doing virtually nothing to mitigate their impacts on rural communities, nor their risk to community opposition and inevitable profit-loss.

While larger extractive corporations like ExxonMobil and Chevron are incentivized to have community engagement policies to avoid negative media exposure (which they’ve experienced plenty of in the past), smaller companies attract minuscule (if any) scrutiny from the media and NGOs – giving them little reason to affect decent policies when working with rural communities. Companies are mitigating their risk exposure to negative social impact reactively rather than proactively, often in response to actual or potential threats to their reputation. This sends the message that communities need to “act up” in order for companies to address their concerns.

Extractive industries must start accounting for the communities in which they work, by implementing comprehensive policies that respect the right to Free, Prior, and Informed Consent.