Where are the human rights in the green economy transition?
The emergence of a green economy during the COVID-19 crisis presents a significant opportunity for the commercialisation of low-carbon solutions that catalyses an important emerging market, incentivising investors and governments to allocate financial capital to drive the world’s transition to a green economy. However, environmentally friendly, low-carbon forms of energy can violate human rights in its supply chains. Investors in the green economy should thus play a significant role in constructing a new green market aligned with human rights.
Renewable energy (fuels and power generation) represent the main component of a global low-carbon transition, without fossil fuels. Following the environmental goals established in the Paris Agreement (2015) and Sustainable Development Agendas (2020 and 2030), the sector has been receiving robust investment. Currently, renewable energy emerges as a beneficiary sector of green bonds proceeds: “global investments in new renewable power have grown from less than USD 50 billion per year in 2004 to around USD 300 billion per year in recent years”.
Although renewable energy plays a crucial role in the low-carbon economy transitions, the human rights policies and practices of companies are not strong enough to ensure that the transition to a global greener economy will be socially fair.
According to the BHRRC, the leading renewable energy companies are not fully meeting their responsibility to respect human rights per the UN Guiding Principles on Business and Human Rights (UNGP). Besides the fact that the transition to a greener economy is increasing in the Latin American region, as it is one of the top emerging markets on renewable energy, these markets are still not aligned with human rights and responsible business principles.
In Mexico, for instance, almost 15 people were killed in an indigenous village because of a wind power dispute. Panama and Chile were taken to the Inter-American Commission on Human Rights for violations of human rights in hydroelectric projects. Also, in Brazil, the exploration of sugar cane, source of biofuels’ production, has been linked with violence against indigenous people and with modern slavery.
Moreover, renewable energy technology demands minerals for solar panels and battery production that can be sourced from conflict zones or mines that do not comply with international human rights standards. The developing regions from which these materials are sourced call our attention for a greener and responsible economic transition. According to the Transitional Mineral Tracker, they are the most impacted by corporate abuses. South America is the second region with the highest level of human rights violations related to cobalt, copper, lithium, manganese, nickel or zinc production in the world, only behind the African continent.
Investors can play a crucial role to ensure that green economy transition strategies will embrace human rights. Ruggie points out that investors are one of the main subjects responsible for integrating human rights into ESG, i.e., to construct sustainable productions and business practices aligned with human rights. The integration of human rights and investment is based on the OCDE Guidelines and UNGP, which states that “Institutional investors are expected to conduct risk-based due diligence to identify and manage harmful human rights impacts or risks of such impacts resulting from activities in which they invest”.
New human rights obligations towards companies demonstrate that investors, as one of the main subjects of the market, need to establish a new mindset through the lens of human rights and sustainability. The existence of new corporate governance focused on human rights is a sign that voluntary guidelines and mandatory norms and laws are converging on a possible future fiduciary duty to respect human rights.