Tuesday, June 23, 2009

Few companies report on indigenous rights: EIRIS

Investors should take a close look at how corporations are dealing with the critical issue of indigenous risks, according to a recent report from EIRIS (Experts in Responsible Investment Solutions).

“Indigenous rights are a human rights issue that companies and their investors should take into account,” the EIRIS report states. The U.K.-based independent researcher analyzed the impact and response of 250 listed companies on the FTSE All World Developed Index considered to have a high or medium risk exposure to indigenous rights.

Firms operating in the extractive sector (such as oil and gas, mining, etc.) and high indigenous risk countries (e.g., Canada, Australia, the United States, South Africa, New Zealand) were identified as medium risk for indigenous rights exposure.

Companies accused of indigenous rights abuse within the past three years were identified as high risk. Of the 250 companies analyzed, 83% were medium risk and 17% were high risk.

“The highest risk companies for indigenous rights are not adequately responding to risks and opportunities,” the report notes, adding that only 7% of companies identified as high risk responded to indigenous rights issues at the corporate level; 62% reported no corporate response whatsoever.

In fact, few companies report on indigenous rights issues and when they do, the quality of reporting is generally poor, EIRIS notes. “Whilst most companies provide a response to allegations of breaches of indigenous rights, few report voluntarily on areas of non-compliance.”

EIRIS used a number of factors in its assessment, including company policies on indigenous rights, free prior informed consultation/consent (a consultative process which companies undertake before commencing operations that are likely to disrupt indigenous communities), employment and resettlement.

Given the level of attention on indigenous rights, the report states, as well as the introduction of laws and regulation in many countries, companies with strong commitments and effective engagement processes will undoubtedly benefit in an environment where access to land and resources is becoming increasingly restricted.

For companies that choose to ignore indigenous rights, the risks are high. For example, earlier this year the U.K.’s Co-operative Bank announced that it would fund a legal challenge by the Beaver Lake Cree Nation against oil and gas companies on the basis that oil sands extraction in Canada is destroying indigenous peoples’ hunting and fishing lands and resources. Mutual fund company Ethical Funds has identified health concerns as the most pressing issue facing indigenous peoples living in and around Alberta’s 140,000 square kilometre oil sands region.

The full EIRIS report is available

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