Institutional Investors and Climate Justice: The Role of Investors in Advancing Prevention of Human Rights Abuse in Investment Chains for Fossil-free Energy

This chapter takes its point of departure in the need for capital investment in the technical solutions and innovation for the transition to fossil-free energy. With a normative anchoring in soft law from the United Nations (UN) and the Organisation of Economic Cooperation and Development (OECD) for ensuring that economic activities do not cause human rights abuse, the chapter discusses how institutional investors can play their part in advancing respect for human rights in this context. The transition depends on renewable energy, in particular biofuel crops for energy production, minerals required for wind or solar power production facilities or energy storage and land for energy facilities. Those natural resources are associated with well documented human rights abuse, often due to weak governance and low levels of respect for the rule of law. The chapter explains how contributing capital needed for the transition provides institutional investors with important opportunities to address the effects of such governance gaps: investors can place requirements on the investment chain, and they can contribute to building relevant capacity for companies in the investment chain to address the harmful effects of governance gaps. Besides shareholder resolutions and other conventional forms of influencing invested companies, investors can exercise influence (so-called leverage) by helping to build human rights capacity with invested companies and cascading this along the investment chain. In turn, this can help investors gain information on perceptions of impacts from the perspective of those affected so that they can take this into account in designing investment strategies. The chapter concludes that institutional investors have important potential for actively addressing the risks of human rights harm related to their investments and thereby address the harmful effects of weak governance and deficient rule of law. This can contribute to bringing activities along the investment chain in line with the human rights commitments of the 2015 Paris Agreement and the Sustainable Development Goals (especially SDGs 7 and 13), as well as with leading soft-law instruments on business responsibilities for human rights.