Towards a Socially Responsible Green Transition: The Role of Investors in Closing Governance Gaps Affecting the Respect for Human Rights Around Raw Materials for a Non‐carbon Economy

Certain corporate practices have long been recognized to cause risks for human rights. Many of these arise as results of governance gaps connected to inadequate rule of law at the national level. Human rights problems related to the production of oil, gas and coal in such countries have been well documented. With recent years’ global political commitment to a transition to fossil-free energy it is important to be mindful of the harmful impacts or risks to human rights that may result from the production of the raw-materials required for ‘green’ energy. The green transition creates a market for products required for renewable energy, in particular bio-fuel crops and certain minerals, some of which are associated with human right abuse. Social harm can reduce societal buy-in for the green transition. Taking point of departure in the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises, this chapter argues that institutional investors have an important potential in addressing governance gaps causing human rights risks. It explains that bringing this potential to fruition will benefit from three inter-related activities: investors performing risk-based due diligence to identify and understand adverse impacts from the perspective of affected stakeholders (rights-holders), which requires meaningful stakeholder engagement designed to take account of that bottom-up perspective; internalizing the findings into investors’ organizations to inform their decision-making to appropriately take account of human rights impacts; and exercising leverage (using their influence) in a manner that not only targets invested companies but also helps those companies and others in the investment value chain to build capacity to identify and appropriately manage adverse human rights impacts. It concludes that to enhance such active engagement by institutional investors in addressing governance gaps there is a need for methods to be developed, informed by public participation as a human right.