Investors, human rights and just transition

Our key takeaway: The world is seeing an unprecedented boom in investment in the renewable energy (RE) sector. Regardless of asset class and level of investment, investors in the RE sector occupy a key position in ensuring respect for human rights is carried through the full RE value chain. They can act individually, for example by defining screening and investment criteria around human rights, conducting human rights and environmental due diligence on investees, conducting stakeholder engagement and ensuring access to remedy. They can also prioritise active engagement and collective effort through investor coalitions that incorporate considerations for human rights in the just transition.‍

The Business and Human Rights Resource Centre has published Investing in Renewable Energy to Power a Just Transition (October 2022), a guide for investors to understand human rights risks and impacts linked to the renewable energy (RE) sector. The guidance also includes specific actions for investors to “actively integrate human rights in their clean energy investment decisions”:

• “Assess investee company performance on the energy transition through a human rights lens”: BHRRC recommends that investors focus on what their investee companies are doing to identify, manage and mitigate risks to people linked to the production or deployment of renewable energy, along the full value chain. For example, investors should “[a]dopt stewardship and responsible investment policies, including voting and proxy resolution guidelines, regarding rights-respecting RE investments.” They can also screen potential investees based on their commitments to respect human rights and labour rights, especially land rights, indigenous rights and protection of human rights defenders; and screen for companies with a “track record of causing, contributing to or being linked with human rights harms.” Investors should also aim for “project portfolio coherence”—that is, avoiding investment in fossil fuels—and seek to invest in companies with science-based emissions targets.

• “Undertake human rights and environmental due diligence”: The guide advises investors to conduct their own human rights and environmental due diligence (HREDD) in the supply chains and operations of investees at multiple stages of the investment, including prior to investing and on an ongoing basis. Results should be made public. Investors should also clarify their expectations of renewable energy investees, including questions around how they conduct their own HREDD, access to remedy and stakeholder engagement; their policies and practices on human rights, especially on key issues for the RE sector like land rights, indigenous rights and protection of human rights defenders; and how the company establishes responsibility and accountability for human rights, including up to the board of directors, and across senior leadership and the full organisation. Asset owners should also develop a human rights policy and human rights expectations for asset and fund managers, and should monitor performance against these expectations.

• “Commit to active ownership and engagement strategies”: Investors have the opportunity to build and use leverage through active engagement with RE investee companies and other stakeholders. For example, they can develop engagement and action plans with “direct and significant RE investees to close any gaps and maintain active dialogue with executive management to address key salient human and labour rights risks in operations and value chains,” using divestment as a last resort. Where directly investing in a project, investors should also engage with potentially impacted people on an ongoing basis. Investors should also ensure that impacted people have access to remedy if they are harmed by RE projects. The guide also recommends that investors “harness the power of collective action” by joining investor coalitions, engaging and collaborating with civil society organisations including trade unions, and by ensuring that existing investor coalitions (such as net-zero coalitions) include explicit commitments to human rights within the just transition.