IFC standards review must respond to UN’s call for rights-based transition mineral value chains

16 October 2024,

by Natalie Bugalski, Inclusive Development International

Summary

UN Secretary General panel’s just transition principles call for human rights to be at the core of mineral value chains
The IFC, a key enabler of transition mineral mining, must operationalise this principle through an overhaul of its Performance Standards
IFC must use the expected 2025 review of its Performance Standards to correct its failed top-down approach to communities affected by mining

Underlying the energy transition lies a daunting human rights conundrum. Getting to “net zero” to address the climate emergency is a human rights imperative. But the most likely pathway to that goal requires an enormous input of minerals for renewable energy technologies. Therein lies a fundamental dilemma: the mineral extractives industry is a chief perpetrator of human rights abuses, including the forced displacement of countless communities who lie in the path of mining operations.

My organisation, Inclusive Development International, has supported communities around the world, from Guinea to Indonesia, whose land, rivers and forests have been destroyed at the hands of some of the world’s largest mining companies. We have seen first-hand the devastation that mining wreaks on precious landscapes, land-based livelihoods and peoples’ lives – and how difficult it is to remedy these human rights impacts after the fact.

There can be no doubt that a new approach to mining is urgently needed. Commendably, the United Nations Secretary-General António Guterres has made it crystal clear that he agrees. In September, an expert panel convened by the Secretary-General released a set of principles aimed at guiding the “renewables revolution…towards justice.” The panel’s first principle rightly states that, “human rights must be at the core of all mineral value chains.”

– The IFC’s…approach to land acquisition…has consistently failed communities –

All eyes will now turn to multilateral development banks (MDBs) like the World Bank Group (WBG) that provide financing and other support to resource-rich developing countries and the mining industry, to see how they operationalise the panel’s recommendations. Importantly, the World Bank’s private sector arm, the International Finance Corporation (IFC), is expected to update its Environmental and Social Performance Standards in 2025. These standards form covenants in loan agreements and set a global bar for other lending institutions, providing a crucial vehicle for bringing the Secretary-General’s vision to life. In reviewing its standards, the IFC must focus on this essential question: how can communities living on mineral-rich land be treated with the respect and dignity they deserve and be given agency in decision-making about prospective mining operations?

A change in approach is urgently required

The IFC’s current approach to land acquisition and resettlement in Performance Standard 5 (PS5) has, along with other MDBs and the wider WBG, consistently failed communities. The evidence from the ground is overwhelming. This failure is rooted in a false underlying premise of the standards: they assume that a top-down approach that relies on short-term “fly in” experts to assess project risks, coupled with community “consultation” processes, will effectively prevent harm. In reality, these are frequently box-ticking exercises to secure financing, which leave communities utterly disempowered and vulnerable to losing ancestral lands, access to basic resources and their entire economic base.

That failed approach needs to be transformed into one that respects community agency and knowledge, as well as their right to take decisions about their own development and to hold developers directly accountable when their rights are violated. Communities must be given the information, resources and tools they need to determine the terms of land access, safeguards against harm, and the benefits they will receive if they agree to a mine. They need to be treated as project partners, allowing them to determine if and on what terms the project proceeds. A new IFC PS5 must reflect this new approach.

IFC’s independent compliance mechanism, the Compliance Advisor Ombudsman (CAO), also has a role to play: the CAO should be ready to facilitate the type of intensive mediations usually used to try to repair harm after its done to instead prevent harm. Mediations that balance power between the parties can help communities and companies reach fair agreements on the terms of land and natural resources access before projects begin, and address issues as they arise throughout the project cycle. Communities must be provided with the independent technical and legal support they need to effectively negotiate community-company agreements or take informed decisions to reject the exploitation of their land.

But none of this will work unless communities can enforce these agreements themselves. Mining operators must be directly accountable to communities. Agreements must be legally binding and enforceable by the communities, either through courts, or where that is not feasible, through other mechanisms like arbitration.

If transition mineral mining proceeds according to the historic extractivist model, it would cause enormous social and environmental harm and that harm would inevitably lead to upheaval and resistance among affected people, destabilising the mineral supply chains that are needed for a successful energy transformation. It is unacceptable and short-sighted to force communities that have contributed the least to the global climate crisis to sacrifice their well-being for the solution.

The UN panel recognises that the energy transition must be pursued in a way that advances justice, equity and human rights. The IFC must rise to the occasion by preparing to tear up the old, failed playbook and introduce a new approach that gives communities the respect they deserve.

This blog originally appeared on the Bretton Woods Project website.

IFC standards review must respond to UN’s call for rights-based transition mineral value chains

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