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Sustainalytics CEO Michael Jantzi offers insights into responsible investing.
Interview with Irene Sosa, Senior Analyst, on Sustainalytics. Part 2.
we think that the risks for community relations are going to be higher in the future. For one thing, the reserves are becoming scarce for pretty much most of the commodities. So companies are going to have to start getting into what they call higher risk areas, which means countries with poor human rights records or regions where there are indigenous communities that have never had contact with mining companies before. So some areas that pose more challenges, they will have to start to get into those areas because there is demand for the metals.
At the same time, you have globalization, and the communities are getting more organized and launching lawsuits or complaints before the OECD. And there is also an increased recognition of the rights of certain groups, like indigenous groups, with the 2007 UN declaration, the Rights of Indigenous People and some more recent discussion about the Right to Free, Prior and Informed Consent. So the bar is raising, and the communities are more connected, and the companies are getting into higher risk areas. And also, because of population growth, there would be more competition over land resources and water in the future. So all these things will make community relations more important.
There are more communities negotiating, what we call, Impact Benefit Agreements with indigenous communities negotiating. It was called Impact and Benefit Agreements with mining companies. So those are enforceable formal agreements between a mining company and the community, and they commit the company to provide jobs, business opportunities, even training so that they can work at the mine and seize those business opportunities, and in some cases, even royalty sharing or lump sum payments for projects that are going to take place on indigenous land.
Now as I said, that's the case mostly in Australia and in Canada because there is -- particularly in the territories that have a high number of original people or indigenous people, and there is either a legal or a de facto requirement that companies have to negotiate that. So for example, if you go to Canada, in Nunavut, when you want to develop a mine in Nunavut, you have to negotiate an Inuit Impact and Benefit Agreement. It's a law. In other places, like Northwest Territories, it's not a legal requirement; however, you pretty much have to have them on board if you want to develop a mine there. So there is a de facto expectation.
And in Australia, same thing, like there are places where this is pretty common and companies are expected to enter into those agreements. Now you have those same companies going to Peru, for example, who are reluctant to get into similar formal agreements with local communities, and I raise Peru for example because right now it's a hotspot for tensions between mining companies and communities. So I think we still have a long way to go in terms of implementing those best practices. But for sure, like those agreements, if you had thought of them 40 years ago, we would have made some progress there. And the communities can benefit significantly from those agreements.
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