Renewables

FIs should develop specific policies and procedures to address the most salient human rights risks in relation to Renewable energy.

Renewable energy policies and procedures should include a recognition of the corporate responsibility to respect human rights as set out in the UNGPs, including implementing human rights due diligence which reflects sector-specific risks. It should also include a commitment to human rights standards based on the International Bill of Human Rights and the ILO Fundamental Conventions.

Policies and procedures can also include a commitment to key sector-specific standards, such as the as well as to standards which address the most salient human rights issues in the sector. Relevant guidelines which can support this line include UNEP-FI / ILO, Just Transition Finance: Pathways for Banking and Insurance and the ILO Guidelines for a Just Transition, and informed by GFANZ, Financial Institution Net-zero Transition Plans and the International Responsible Business Conduct Agreement for the Renewable Energy Sector.

Any commitments by FIs to these standards, or any concrete expectations for clients/investee based on these standards, should be accompanied by an explanation of how the human rights-related expectations embedded in these standards will be implemented at all stages of renewable energy project development, and along the renewable energy value chain. This can include human rights minimum criteria for the provision of financial services, such as:

• Integration of human rights considerations into all relevant environmental and social documents, including the Environmental Impact Assessment (EIA), Resettlement Action Plan (RAP) or equivalent.
• Requesting appropriate documents to address specific human rights risks, including ensuring free, prior and informed consultation and consent of Indigenous Peoples (where applicable).
• Ensuring that vulnerable groups are part of the consultation process, including through the establishment of a complaints mechanism for local communities and other relevant stakeholders.

For further information, see ‘Taking Action – Strengthen human rights in FI policies’.

See also ‘Policy commitments and human rights’ for practical guidance on how to develop policy commitments which are consistent with the UNGPs, and how to integrate relevant human rights commitments in other policies and procedures.

Human rights screening and risk assessment should include all key entities in the renewable energy value chain. This is particularly pertinent for renewable energy financing, as the materials involved in the value chain to renewable energy projects may give rise to salient risks (see ‘Minerals and metals extraction’). Decision and deployment cycles for renewable energy projects are shorter than fossil fuels, and HRDD processes therefore need to anticipate this shorter timeline.

FIs should screen their renewable energy portfolio to map and identity salient human rights risks, whether their clients’ / investees’ activities in the sector are likely to impact on vulnerable groups (workers, Indigenous Peoples, affected communities, energy-users, consumers), and to evaluate the systems that their clients have in place to mitigate and prevent these impacts.

FIs can seek to ensure that screening and risk assessments reflect key contextual risk factors in renewable energy:

• Operational and geographical context: as risks to workers and communities are often very country-specific, a robust risk assessment process is needed to assess risks to these groups at a specific project. Specific considerations might include whether critical minerals required for the project are linked to armed conflict. Renewable energy which requires significant land use – for example large wind or solar installations – may be linked to specific human rights impact related to land acquisition and community displacement.
• Type of business relationship: FIs should carefully assess how materials used in renewable energy projects are sourced (also in view of potential trade controls and sanctions). FIs should also consider downstream human rights impacts, including post-lifecycle disposal of technologies that rely on such materials (see ‘Circular economy’). Due diligence requirements should extend to contractors and sub-contractors who will likely engage the vast majority of the project workforce (see ‘Infrastructure’) and other business partners that may be involved in land acquisition and resettlement.
• Client / investee specific risk factors: identify if the client / investee has any documented track record of causing, contributing to or being linked with human rights harms, including retaliation against HRDs. To inform initial client / investee risk screening, BHRRC has developed a Renewable Energy & Human Rights Benchmark which can be used in assessing the human rights commitments and practices of renewables project developers, solar manufacturers and wind turbine manufacturers.
• Presence of vulnerable groups: specific attention should be given to vulnerable groups of workers (migrant workers, women, agency and contracted workers) and communities (Indigenous Peoples, ethnic and racial minorities, rural and marginalised communities).

See ‘Taking Action – Strengthen FI risk management systems and processes’. See also ‘Human Rights Screening and Risk Assessment’ for practical guidance on developing risk screening and assessment systems and processes.

Throughout the financial cycle, FIs should gather information on how clients / investees are managing specific human rights risks and impacts relevant to renewable energy. This could include requiring clients / investees to provide information on:

• Impact assessment incorporating a human rights lens into planning, design and due diligence in renewable energy projects: almost all large-scale new build, expansion, development and decommissioning projects will require an Environmental and Social Impact Assessment (ESIA). An approach that integrates specific human rights risks within the framework of a broad ESIA and ensuring that these are assessed appropriately by qualified exert staff, or by commissioning a stand-alone Human Rights Impact Assessment, or specific assessments of particular rights risks is a good starting point.
• Land acquisition and use: how the company acquires land and ensures that land rights are respected, and how FPIC is implemented (where relevant); any land use agreements in place with local communities or indigenous groups – with particular attention to any terms related to land access and compensation; any land use conflict encountered and measures to address this; how local opposition is managed. If relevant, this may also include identifying the type of land where project activities will be located, and measures in place in related to protected areas, indigenous reserves or other types of cultural heritage sites.
• Land rights: where land rights are highly relevant, request companies to provide a mapping of potentially affected communities / rightsholders and a community engagement plan in at various stages of due diligence, with periodic progress reports to the FI. FIs can request information from the company about the land/use conflicts it has encountered, the measures it has taken, and the outcomes it has achieved, as well as its policy for managing these issues. FIs can also request information on how companies manage local opposition, and what measures are in place to prevent human rights abuses and / or reprisal against human rights defenders.
• Indigenous peoples: where indigenous peoples’ may be affected, ask clients to show relevant policies, explain how groups have been engaged and to demonstrate how FPIC has been carried out.
• Labour rights: where low skilled workers / hazardous jobs are involved in construction activities, ask clients what policies, plans and procedures they have to recruit and employ workers, plans for contractor and accommodation management, and review grievance mechanism data.
• Worker influx: where construction or operations is likely to involve a significant worker influx, ask clients what policies, plans and procedures are in place to mitigate risks to local communities.
• Grievances or reports: human rights claims or complaints, particularly regarding land and cultural rights, and natural resources submitted by communities in the project’s influence zone, along with the measures adopted to address them.
• Labour incidents and/or worker complaints, as well as the mitigation/ prevention measures taken. This should extend to contractors and sub-contractors’ workforces.
• Value chain, and measures implemented to promote respect for human rights with suppliers.
• Consultation: approach to consultation with potentially affected groups and other relevant stakeholders, including processes, participants, findings and outcomes.

The outcomes of all rights-related due diligence must then be reflected in Actions Plans, financing commitments and monitoring and reporting requirements.  

Effective client engagement helps to build a common understanding of risks, gaps, and required actions. This ensures that measures can be adequately appropriated and implemented. Client / investee engagement in the renewables sector can be informed by the  guidelines provided in the BHRRC, Investing in renewable energy to power a just transition. It may also be useful to refer to the Due Diligence Assessment Framework developed by the International RBC Agreement for the Renewable Energy Sector.

As part of their leverage strategies, FIs can:

• Work with the client / investee to develop and implement a clear public commitment to human rights (specifically land rights, Indigenous Peoples rights and labour rights)
• Require that the client / investee conduct robust human rights due diligence in their upstream value chain of products and materials used to contract renewable energy projects, for example by mapping their core suppliers and contractors; requiring suppliers and contractors to adhere to and cascade requirements on human rights to their suppliers on improved management of those identified human rights risks (land, indigenous peoples, decent work) that produce raw materials and that offer sub-contracted services; offering capacity building for suppliers integrating sustainability KPIs into supplier contracts, engaging with civil society and rightsholders and engaging with suppliers and peers to build leverage
• Encourage certification of raw materials: for some raw materials in renewable energy upstream value chains, certification standards exist. While certification is not a proxy for HRDD, it can improve both value chain transparency and understanding of salient risks in the value chain. See ‘Minerals and metals extraction’ and ‘Sectoral initiatives and partnerships’ (above).

See also ‘Taking Action – Client / Investee Engagement’.

Contractual requirements are a common tool to build leverage, and FIs should consider integrating human rights considerations into contractual clauses based on organisational human rights policies and commitments.

FI financing conditions should clearly integrate relevant human rights standards into contracts with clients / investees which compel them to undertake meaningful human rights due diligence, including the identification, prevention, mitigation, and remediation of human rights risks in their operations and value chain (for example, requiring the company to develop a supplier monitoring plan with suppliers whereby the company reports the origin of the materials and products used for the project and how the company identifies and addresses the salient human rights risks associated with its upstream value chain).

It is also vital to ensure the integration of human rights expectations into client / investee procurement processes. Client / investee procurement is the means by which project financiers’ human rights expectations become concrete and binding on contractors and sub-contractors delivering the asset. At a minimum this should include establishing and communicating a code of conduct for suppliers and (sub-)contractors that requires good practice in relation to labour rights, land rights and FPIC, GBVH and community health and safety, information disclosure, non-retaliation, access to grievance and stakeholder engagement. Where possible, these requirements can be supported through contracting requirements (in both Specifications and Particular Conditions) and ongoing risk-based due diligence on key human rights risk areas. Note that the Tender and Procurement Processes Sub-Working Group of the International RBC Agreement for the Renewable Energy Sector is currently exploring practical ways to incorporate RBC requirements in procedures for wind and solar farms (permits).

See also ‘Taking Action – Contractual provisions’.

To require and incentivise clients / investees to integrate human rights considerations in their policies, processes and risk management systems, FIs can support clients / investees in the development of mitigation plans, and agree on timelines and specific actions.

FIs working with clients / investees in renewable energy can focus mitigation efforts in all the following areas:

• Labour rights impacts on project sites, on-site operations or in upstream value chains.
• Local communities, including Indigenous Peoples, affected by land acquisition for panels, crops or turbines, or the designation of marine exclusion zones for offshore wind farms.
• Potential increased demand for conflict minerals.
• Biodiversity and water quality impacts from pesticides and other agricultural techniques associated with biofuels.
• Waste management challenges from use of new materials and processes.
• End of product life-cycle management, such as the scrapping of solar panels and electric car batteries.

For more general information, see ‘Taking Action – Action Plans and Specific Mitigations’.

In relation to renewable energy, this could include for example: refraining from providing financing to client / investee companies / projects until free, prior, and informed consultation and consent of Indigenous Peoples have been conducted; refraining from providing financing to companies / projects sourcing materials from a facility or supplier identified on trade sanctions lists (such as the UFLPA Entity List); refraining from imposing time and cost conditions on project implementation that may impact the rights of workers; and refraining from financing projects where there is knowledge of land conflicts or disputes over land ownership with communities residing in the area.

See ‘Taking Action – Avoid actions and omissions that facilitate or incentivise human rights abuses’.

FIs should work collaboratively with other stakeholders to inform their policies, identify risks, improve monitoring systems and grievance mechanisms, as well as to address entrenched human rights challenges in the renewables sector. This should Involve meaningful consultation with potentially affected groups and other relevant stakeholders, as appropriate to the nature and context of the operation. The relevant stakeholders for FIs financing the renewables sector would include: other banks and investors with similar portfolios, industry associations, regulators (such as Ministries/Secretaries of Energy, and entities coordinating state-owned sector enterprises), multilateral organisations, NGOs working on human rights issues linked to the sector, trade unions, academics, and rightsholders affected or potentially affected by client / investee activities as Indigenous Peoples and other relevant communities. and their legitimate representatives.

FIs can engage with credible multi-stakeholder initiatives that promote human rights principles and standards in renewable energy, central to which is the International RBC Agreement for the Renewable Energy Sector – see ‘Sectoral initiatives and partnerships’.

At the client / investee level, FIs must ensure that companies adopt and implement a community engagement policy and process aligned with the UNGPs. A client’s / investee’s policies and processes should outline meaningful stakeholder engagement in line with national legislation and international best practice. They should reflect the following:

• Ensuring meaningful stakeholder engagement throughout the process: Stakeholder engagement should begin early in the scoping phase of a renewable energy project. Throughout, FIs should be encouraging clients to ensure that all potentially affected rightsholders are mapped and identified, including vulnerable groups such as women, children and elderly who might not be adequately represented by existing local functions. The process needs to be conducted in good faith and needs to refrain from exercising any pressure that might lead to fear, threats or intimidation. The information provided must be complete, neutral and presented in a way that is comprehensible to local communities – i.e. in their native language and broken down to a level that non-experts can understand and properly assess. Further, rightsholders need to be able to influence decisions that directly affect them.
• Ensuring FPIC for indigenous communities: Indigenous peoples enjoy the right to free, prior and informed consultation and consent (FPIC). This means that in addition to meaningful engagement (see above), indigenous peoples have the right to refuse a project to commence or continue on their lands. FIs should therefore require clients to set up particularly sensitive engagement processes, and to acknowledge that if an indigenous community directly or indirectly withholds its consent, this means a project must not be started or continued.

See ‘Taking Action – Stakeholder engagement and collaboration’. See also ‘Stakeholder engagement’ for guidance on collaborating, engaging and pursuing collective action.

FIs can enhance transparency and disclosure practices by providing stakeholders with access to sufficient, relevant and frequent information about finance and investments, including potential human rights impacts, mitigation measures, and grievance mechanisms. FIs can also develop and publish reports against clear indicators reflecting a human rights perspective, including salient issues, measures, and results, and seek to incorporate a human rights dimension in their climate transition and Just Transition reporting.

FIs should require clients / investees to communicate on: the company’s human rights and environmental due diligence process; the most important actual or potential adverse impacts identified in the value chain; activities that have been undertaken for the mapping and monitoring of those impacts; and measures carried out by the company to prevent, remedy or cease actual or potential adverse impacts and the results of such measures

Periodic reporting from the client / investee to the FI against agreed human rights indicators should also be agreed, and FIs should set up a pathway for critical reports of severe human rights impacts to be escalated immediately.

See also ‘Taking Action – Transparency and disclosure’.

FIs can provide training and capacity building for FI staff on relevant human rights issues in relation to the identification, prevention, and mitigation of human rights abuses in the renewable energy sector, linking sectoral characteristics (e.g. need for land, labour intensity, community opposition and HRDs) with potential human rights impacts, and clarifying the involvement of the FI with adverse impacts.

FIs should also ensure that clients / investees have sufficient technical, financial and logistical resources available, including an interdisciplinary team that includes qualified with human rights expertise and knowledge on the local context. This might include fostering clients to provide human rights trainings for relevant employees at corporate and/or operational level, relevant security personnel and (sub-)contractors on human rights policies and procedures. Training should be tailored to emphasize the specific human rights risks relevant to specific roles, functions, locations, and a company’s operations or projects. ALIGN’s Business Guide For Commercial Wind And Solar Project Deployment provides examples of human rights training delivered by renewable energy companies.

See also ‘Taking Action – Capacity building and training’.

FIs can work with clients / investees to establish robust monitoring and evaluation mechanisms, which may include periodic internal or third-party reviews or audits of the outcomes achieved as well as requirements under the EU Corporate Sustainability Reporting Directive. Monitoring should be evidenced by periodic internal or third-party reviews or audits, KPIs, annual reports, or due diligence action plans.

At operational level, clients / investees should adopt monitoring mechanisms that are appropriate to the level of risk, particularly on higher risk sites / in higher risk value chains. FIs should ensure that clients / investees have set up a system of in person monitoring to review impacts on workers and communities on an ongoing or periodic basis. These assessments should be led by teams with the relevant skills and expertise.

FIs should ensure that clients / investees have appropriate procedures in place to cascade monitoring through the value chain. Such measures include: improved grievance mechanisms, dialogue with worker committees / unions, KPIs to track potential negative impacts.

See ‘Taking Action – Monitoring and evaluation’ for practical guidance on monitoring and evaluation processes to track human rights risks and impacts associated with business activities

FIs should ensure that accessible and effective grievance mechanisms are in place to enable affected stakeholders to raise concerns and seek redress for any alleged human rights abuses related to their investment or lending activities in renewable energy. This includes requiring clients / investees to have in place or to participate in a grievance mechanisms aligned with Principle 31 of the UNGPs. FIs can set up their own grievance mechanisms, participate in one or more grievance mechanisms established together with other FIs, or participate systematically in clients’ / investees’ grievance mechanisms.

At operational level, FIs should require clients to:

• Co-develop with workers and communities an effective and rights-compliant project-level grievance mechanism.
• Strengthen transparency, predictability, effectiveness, and accessibility of project-level grievance mechanisms and independent accountability mechanisms, including by requiring clients and all stakeholders within their value chains to inform peoples and communities about the availability of these mechanisms.
• Consider earmarking contingency funds for the operation of project-level grievance mechanisms and provision of remedies, including through insurance instruments, ring-fenced funds, trust funds or other relevant financing mechanisms.

In value chains associated with renewables, human rights grievances are typically related to adverse impacts on workers, Indigenous Peoples and local communities, and human rights defenders. Particular attention should be given to gender-sensitive mechanisms and procedural rules, with a particular focus on addressing the challenges faced by women experiencing harassment and violence either in the workplace or in the community.

See ‘Taking Action – Improve and support the effectiveness of grievance mechanisms to ensure and enable remedy’.