Ensuring FPIC Advocacy on Extractive Industry Projects

Extractive Industry Impacts

IIPWG鈥檚 shareholder advocacy during the construction of the Dakota Access Pipeline (DAPL) encompassed high-level engagement with investors and banks financing the disputed project, which was permitted through inadequate consultation with Tribes and despite poor environmental impact review, especially concerning adjacent tribal treaty lands.

In February 2017, to call on banks financing DAPL to address or support the Standing Rock Sioux Tribe鈥檚 request to reroute the pipeline and avoid their treaty territory. IIPWG鈥檚 campaign ran parallel to action from Tribes and Native-led organizations, as well as mass social protest against corporate and government fast tracking of the potentially environmentally devastating project. Combined efforts to defend and protect the land and rights of the Tribes led to the 鈥淒efundDAPL鈥 social campaign and global awareness of the plight of the Tribes.

IIPWG鈥檚 involvement resulted in divestment from the project, largely from European banks. Ultimately these divestments and reputational harms ballooned the cost of the project from initial estimates of $3.8 billion to over $12 billion. Following a July 2020 court order to halt DAPL and clear the pipeline due to the poor initial environmental review, material loss continues to grow.

See also activation from IIPWG participants on fossil fuel projects inmpacting Indigenous Peoples such as Enbridge Line 3 , and , as well as increasing concern of energy transition impacts.

Why This Issue Matters

  • DAPL is exemplary of detrimental development patterns that occur daily for Indigenous communities around the world. These patterns often stem from improper consultation with Indigenous Peoples on projects that affect them, and from not seeking Indigenous Peoples' free, prior and informed consent (FPIC) through the full course of project timelines.
  • Failure to conduct risk assessments on projects inclusive of human rights and failure to disclose known social risks to investors correlates with the long-term downward trend of a company鈥檚 value.
  • Social risks need to be integrated into due diligence practices to influence behavior and to catalyze full integration of ESG consideration in the capital markets.

The Takeaway

Financiers may be implicated in social conflict and controversies related to pipelines and could face long-term reputational damage resulting from consumer boycotts and possible legal liability. Banks and other investors should prioritize the free, prior and informed consent of Indigenous Peoples as a matter of fiduciary duty in operational due diligence.

Next Steps

  • Track ongoing DAPL legal cases and impacts.
  • Monitor other pipelines and extractive projects (e.g. KXL, Enbridge, Arctic Drilling).
  • Utilize tools to perform FPIC Due Diligence on projects that may impact Indigenous Peoples.
  • Elevate issues related to man camps and the Missing and Murdered Indigenous Women crisis.
  • Ensure extractive industry models aren鈥檛 adopted wholesale as economies move to renewable energy.
  • Encourage just transition.