The wind sector faces human rights concerns


May 5, 2017

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The growth of wind is leading to potentially deadly conflicts over land, and firms are at risk of abusing the rights of indigenous peoples. Those are two of the findings in a report from human rights analyst Business & Human Rights Resource Centre.

The organisation has also said investors should do more to understand and mitigate the risks, to avoid damage to their own business models and to local communities.

Conflicts. Human rights abuses. Harming indigenous peoples. These are very loaded accusations that make it sound like the BHRRC is going to give the wind sector a kicking, but it doesn’t.

The report actually gives useful insights into the problems that developers and investors face when trying to secure the land rights for wind farms in emerging markets; the financial risks that these cause; and how to deal with them.

How big are the risks? Well, you can’t build a wind farm without a site (as banal as it is to put those words in print!), which means that a land dispute is a surefire way to scupper a scheme. In our Emerging Markets report, published next week, Anette Eberhard, chief executive of Danish export credit agency EKF, says land disputes are one of the key risks of moving into new markets.

There is plenty of potential for dispute here. There are up to 350million people in the world that belong to indigenous groups, or 5% of the world’s population, which hold as much as 65% of the world’s land area in traditional systems.

The problem is that governments only recognise that 18% of the world’s land area is held by indigenous groups, and this gap opens up confusion that can affect investors. It means a government can’t necessarily give the green light that a company needs.

We have seen a couple of such reports in recent years. The confusion over plans to build wind farms on protected Sor Por Kor land in Thailand is one example of where confusion over land use has hit the plans of wind developers and investors.

And the cancellation of the planned 61MW Kinangop wind farm in Kenya in early 2016 after protests from farmers, which led to the fatal shooting of one protestor, is another.

We shouldn’t overstate the number of cases: the BHRRC has received 115 reports of harm to local communities as a result of renewables projects since 2005, mostly related to land but also to violence and killings. Ten a year is not a lot, but they can de-rail projects and do major damage to firms’ reputations and finances.

As well as direct legal costs, such disputes can increase the capital expenditure on projects through delays and an increased security presence, for example.

It can also delay projects coming online, and thus the income from them; cut investors’ ability to raise capital; and, in the worst cases, all of the spending on a scheme can be lost.

This is why the BHRRC identifies steps that investors can take to mitigate their risks. The key one is that investors should give greater consideration to human rights in their due diligence, and follow the United Nations Guiding Principles on Business & Human Rights. This sets out states’ duties to protect communities against human rights abuses from third parties including companies.

These abuses could include restricting indigenous peoples’ rights to important land, including farmland; negatively affecting their cultures; and failing to respect their right to give free, prior and informed consent for projects. That consent needs consultation at an early stage with adequate information and no coercion.

None of this is new to developers with experience in emerging markets, but it does set out a more formal process that they can follow. And, as wind epands globally, it also shows investors some of the questions that should be asking before they decide which firms to back and in which projects to invest their money.

The death at Kinangop was a rarity, but disputes over land can be damaging without being deadly. As the wind industry grows globally, this is a timely reminder that there are risks for investors of infringing – even unwittingly – on the rights of local groups.

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