An Actionable Due Diligence Toolkit for Institutional Investors

Policy and Governance

This section provides guidance for investors for incorporating a public policy commitment on Indigenous rights and for incorporating Indigenous rights into operational policies, procedures, and management systems. This should include a public policy commitment, which is embedded through operational policies and procedures required to embed the commitment throughout the organization.

Publicly commit to respecting Indigenous rights

The responsibility to respect human rights requires that businesses, including investors, have a public commitment to respect human rights, approved at the most senior level of the business.221 Thus, in relation to Indigenous rights, investors should publicly commit to respect the rights of Indigenous peoples, as part of an overarching human rights policy, or where applicable, other overarching policy, e.g., a responsible investment policy.

Indigenous rights checklist for investor policy commitment

Overarching commitment:

  • Commitment to respect individual and collective rights of Indigenous peoples including the rights enshrined in the UN Declaration on the Rights of Indigenous Peoples and the ILO Convention 169.
  • Respect the right to self-determination; culture; right to lands; territories and resources; and Free, Prior, and Informed Consent.
  • Adhere to the UN Guiding Principles on Business and Human Rights and emerging legal frameworks and standards on business responsibilities in relation to human rights.

Expectations on investee companies and their boards:

  • Develop and implement policies and due diligence processes to identify, cease, prevent, mitigate, and remedy actual or potential impacts on the individual and collective rights of Indigenous peoples, in accordance with UN Declaration on the Rights of Indigenous Peoples and ILO Convention 169.
  • Respect Indigenous peoples’ right to self-determination; culture; lands, territories, and natural resources; and Free, Prior, and Informed Consent, which includes the right to withhold consent.
  • Ensure that good faith consultations are undertaken with Indigenous peoples’ representative institutions and obtain FPIC prior to initiating any activities affecting Indigenous peoples’ lands, territories, and resources, and on an ongoing basis.
  • Where national laws fail to protect Indigenous rights, to respect internationally recognized rights of Indigenous peoples, in particular those set forth in the UN Declaration on the Rights of Indigenous Peoples.

Embed commitment through operational policies and procedures

In accordance with the business responsibility to respect human rights, an investor’s overarching policy commitment should be reflected in operational policies and procedures necessary to embed it throughout the business and throughout the investment cycle.222 Thus, where relevant, investors should incorporate Indigenous rights into operational policies, procedures, and management systems, such as the following:

  • Responsible investment policy, sustainable investment policy, or ESG (Environment, Social, and Governance) policy.
  • EU Sustainable Finance Disclosure Regulation (SFDR) policies: due diligence policy, statement on principal adverse impacts
  • Engagement policy, proxy voting guidelines, stewardship policy.
  • Sector-specific policies and position statements.
  • Internal due diligence and screening tools and guidelines.
  • Climate and nature-related commitments, strategies, and implementation plans.
  • Investment mandates for external investment managers.

Investors should also review current data providers or other internal due diligence systems used and take necessary steps to ensure that they are adequate for identifying and assessing adverse impacts on Indigenous peoples, or request that data providers supply adequate information.

The following case studies demonstrate how Indigenous peoples’ rights can be incorporated into investor policies (although the inclusion of these case studies does not necessarily mean that these policies and their implementation are perfect).

Case Study: Storebrand

Norwegian financial services group Storebrand’s human rights policy sets out its commitment to respect all internationally recognized human rights and to follow the UN Guiding Principles and the OECD Guidelines for Multinational Enterprises. Storebrand commits to preventing violations and respecting international human rights, including Indigenous and Tribal peoples’ rights. In addition, Indigenous rights are incorporated into several of Storebrand’s policies and statements, including:

Case Study: SEB Investment Management

SEB Investment Management’s 2023 Sustainability Policy incorporates Free Prior and Informed Consent of Indigenous peoples into its integration and active ownership approach. Specifically, SEB Investment Management monitors “the share of investments reporting that they are committed to Free, Prior and Informed Consent to ensure the rights of indigenous peoples.”

Case Study: BNP Paribas Asset Management Sector-Specific FPIC requirements

BNP Paribas Asset Management’s Responsible Business Conduct Policy (as of January 2023) has several sector-specific requirements and evaluation criteria for certain sectors.

Palm Oil

Upstream palm oil companies are required to:

  • Have a policy in place to obtain the Free, Prior, and Informed consent (FPIC) of indigenous and local communities, prior to developing new oil palm plantations.

BNP Paribas Asset Management will evaluate whether downstream palm oil companies:

  • Respect land tenure rights, including the Free, Prior, and Informed consent of indigenous and local communities.

Forestry Management

BNP Paribas Asset Management requires that upstream pulp companies:

  • Will not develop a new plantation on land owned or occupied by local communities without having (and in line with the FSC or PEFC principles and criteria):
    • Conducted a free, prior, and informed consultation process.
    • Achieved an acceptable compensation arrangement, and
    • Implemented an efficient grievance mechanism.

Note: While a policy on Indigenous rights should cover all investments and sectors, this example shows how Indigenous rights can be incorporated into policies based on sector-specific criteria. However, the policy also has several loopholes; for example, the policy lacks commitments to or requirements that investee companies respect the rights set forth in the UN Declaration on the Rights of Indigenous Peoples (UNDRIP). Moreover, the policy on forestry management requires agriculture companies to have conducted a free, prior, and informed consultation process but does not explicitly require companies to have received consent.

Case Study: Calvert Research and Management Proxy Voting Guidelines

Calvert Research and Management has incorporated Indigenous rights into its 2023 Proxy Voting Guidelines, setting out its expectations on investee companies and how they will vote.

The guidelines state that investee companies should develop policies to avoid complicity in Indigenous rights violations through business partnerships, supply chains, or financial investments. Additionally, the guidelines state that projects and investments should proceed only with the FPIC of Indigenous communities that may be significantly impacted.

Calvert will “support proposals asking companies to respect the rights of local and indigenous communities to participate in decisions affecting their local environment, consistent with international law regarding the rights of Indigenous people to free, prior, and informed consent.”

Incorporate Indigenous rights into the EU Sustainable Finance Disclosure Regulation (SFDR) framework

Policies: The EU’s Sustainable Finance Disclosure Regulation (SFDR) entered into force in March 2021 and requires financial market participants to disclose sustainability-related information. While the regulation does not explicitly mention Indigenous peoples’ rights, investors can include Indigenous rights in their own policies referred to in SFDR.

  • Due diligence policy referred to in Regulation (EU) 2019/2088 Article 4, as shown in Box 3.
  • Engagement policy referred to in Regulation (EU) 2019/2088 Article 4, as shown in Box 4.

Illustrative language for due diligence policy

[Entity] is committed to respect the rights of Indigenous peoples, including the rights enshrined in the UN Declaration on the Rights of Indigenous Peoples and the ILO Convention 169 on Indigenous and Tribal Peoples. To meet this responsibility, [Entity] conducts due diligence to identify, assess, avoid contributing to, and seek to prevent, mitigate, and enable remedy for actual or potential adverse impacts on the rights of Indigenous peoples.

[Entity] pays heightened attention to actual or potential impacts on Indigenous peoples’ rights to self-determination; right to own, control, and use their lands, territories and resources that they possess by reason of traditional ownership or other traditional occupation and use; right to life, security and physical integrity; right to culture and cultural identity associated with their way of life; and their right to give or withhold Free, Prior, and Informed Consent to projects or proposals that affect their rights, lands, territories, and resources. To identify and assess actual or potential impacts, [Entity] makes best efforts, including by seeking to engage with data providers or by consulting with external experts or affected rightsholders.

Note. This sample text does not illustrate a standalone policy but rather one that forms part of a wider policy which sets out a human rights due diligence process in accordance with international due diligence standards and best practice, which includes a zero-tolerance approach to attacks on environmental and human rights defenders.

Illustrative language for engagement policy

[Entity] expects investee companies to respect the rights of Indigenous peoples, including the rights enshrined in the UN Declaration on the Rights of Indigenous Peoples and ILO Convention 169 on Indigenous and Tribal Peoples. Investee companies should develop and implement policy commitments, due diligence processes, and processes to enable remediation to avoid causing or contributing to adverse impacts on Indigenous peoples’ rights through their own activities and seek to prevent or mitigate adverse impacts on Indigenous peoples’ rights that are directly linked to their operations, products, or services by their business relationships. This responsibility exists over and above compliance with national laws and regulations.

Investee companies should ensure that good faith consultations are undertaken with Indigenous peoples’ representative institutions and ensure that Free, Prior, and Informed Consent of Indigenous peoples is obtained prior to initiating any activity affecting their rights, lands, territories, or other resources, and maintain it on an ongoing basis, in a manner that guarantees respect for their individual and collective rights and that is consistent with their laws, customs and protocols and international human rights standards. Investee companies should guarantee redress to affected Indigenous peoples for any negative impacts on their lives and environment, guarantee fair and equitable sharing of benefits arising from the use of their lands, territories, and resources, and respect decisions of Indigenous peoples to withhold consent.

[Entity] supports proposals that ask companies to strengthen their policies and due diligence processes to respect Indigenous peoples’ rights, as well as proposals that ask companies to disclose relevant information regarding actual or potential impacts on Indigenous peoples that they may cause, contribute to, or be linked to by their business relationships in their value chain. Where companies fail to uphold our expectations in this regard, we will consider voting against the board of director considered to be responsible for oversight failures.

Note. This sample text does not illustrate a standalone policy but rather one that forms part of a wider policy which sets out engagement processes in accordance with international due diligence standards and best practice, which includes a zero-tolerance approach to attacks on environmental and human rights defenders.

NoDAPL Action in San Francisco, California. © Amazon Watch

Statement on principal adverse impacts: Regulation (EU) 2022/1288, also known as the “Regulatory Technical Standards” (RTS) provides a list of indicators of adverse sustainability impacts for investors to identify, assess, prioritize, and disclose principal adverse impacts on sustainability factors. In addition to the list of indicators provided by the regulation, investors that fall under the scope of SFDR can select additional indicators, as shown in Table 1.

Table 1. Incorporation of Indigenous rights into the PAI statement (Table 1, Annex I, Delegated Regulation (EU) 2022/1288).

Other indicators for principal adverse impacts on sustainability factors
[Information on the principal adverse impacts on sustainability factors referred to in Article 6(1), point (a) in the format in Table 2]
[Information on the principal adverse impacts on sustainability factors referred to in Article 6(1), point (b), in the format in Table 3]
[Information on any other adverse impacts on sustainability factors used to identify and assess additional principal adverse impacts on a sustainability factor referred to in Article 6(1), point (c), in the format in Table 2 or Table 3]
Adverse Sustainability ImpactAdverse impact on sustainability factors (qualitative or quantitative)Metric
Indicators applicable to investments in investee companies
Additional indicators to assess principal adverse impacts on a sustainability factor

Indigenous rights

1. Lack of Indigenous peoples’ rights policy

1. Share of investee companies without a policy commitment to respect the rights of Indigenous peoples as articulated in the UNDRIP, including Free, Prior, and Informed Consent

2. Share of investee companies without a policy that requires suppliers to respect Indigenous peoples’ rights as articulated in the UNDRIP, including Free, Prior, and Informed Consent

3. Share of banks without a policy commitment to respect the rights of Indigenous Peoples as articulated in the UNDRIP, including Free, Prior, and Informed Consent

2. Companies involved in adverse impacts on Indigenous rights

1. Number of incidents of severe adverse impacts on Indigenous peoples’ rights

2. Number of incidents of severe adverse impacts on Indigenous peoples’ rights for which investee companies have not implemented a remediation plan

Note: These indicators may be modified to better fit investors’ investment universe, and as more data becomes available. The European Financial Reporting Advisory Group (EFRAG), through the European Sustainability Reporting Standards (ESRS) is introducing sector-agnostic and sector-specific disclosure requirements for European companies, which include disclosure requirements on Indigenous rights. It is also recommended that investors request data providers to provide data on Indigenous rights.

Respecting Indigenous Rights

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