Investment Policy

Why Investment in Indigenous Communities is Essential for Socio-Environmental Development

Indigenous communities are on the front lines of climate change and environmental degradation. Their lands account for 22% of the world’s surface and 80% of the world’s biodiversity. The values, traditions and culture of indigenous groups portray a symbiotic relationship with the earth, with their roles as hunters, fishermen, herders and farmers all reliant upon a healthy environment and natural ecosystems. This intimate relationship has seen the expert management of resources for millennia, ensuring that precious biodiversity is not overexploited. This is the cornerstone of intergenerational equity – “the principle that every generation holds the Earth in common with members of the present generation and with other generations, past and future.” Equally, this means that indigenous groups are quick to spot, and adapt to, changes in the environment, which has “often proven their sustainability and resilience in the face of environmental changes.”

Yet, they are often overlooked. Indigenous peoples contribute a tiny proportion to global greenhouse gas emissions yet suffer the consequences of climate change disproportionately. Rising sea levels displacing communities in Canada and islands in the South Pacific, wildfires impacting Aboriginal lands and melting ice disrupting the cultural practices of the Sami in Northern Europe, these challenges spread far and wide. This leads to damaging consequences, including increasing burden on mental health. As the Environmental Justice Foundation notes, half of Sami adults in Sweden suffer from anxiety and depression, 1 in 3 reindeer herders have contemplated suicide and suicide rates of Sami people can be four times the national average. A recent study by the University of Helsinki found that such groups are especially vulnerable to resource exploitation and extraction, despite their resistance. Abandoned mines, oil pipelines encroaching on sacred lands and waste facilities that pollute waterways used for sustenance are just some of the ways industrial development negatively impacts communities. This exploitation and exploration of sacred lands stems from a history rooted in colonialism that led to land grabs and the corralling of indigenous groups in reserves.

Such actions become worse when we consider that indigenous knowledge is invaluable to climate and conservation goals. From understanding natural solutions for degradation to awareness of sustainable food systems and ecosystem health, their role is essential. A 2020 study in the Journal of Applied Ecology collected more than 300 indicators developed by indigenous people to monitor changes in their ecosystem. These indicators gave detailed insights that would be impossible with scientific study alone. For example, understanding the changes in behaviour of animals based upon the colour of fat found in hunted prey or the potential daily catch and length of harvest based on observed resource availability. Pamela McElwee, lead author of the study, said “scientists and indigenous communities working together are needed to understand our rapidly changing world”, noting that “indigenous knowledge is absolutely essential for understanding the cumulative impacts of biodiversity loss and ecosystem degradation.” A collaborative, rather than extractive, effort is necessary between indigenous groups, scientists and governments, with greater investment needed.

Investing in Indigenous Groups

As the International Institute for Sustainable Development recognises, “indigenous knowledge can be combined with new information and innovation in agriculture and land management to protect biodiversity and foster integrated sustainable management of diverse food systems.” This is already happening in some regions. In Peru, the government works with local communities to develop forestry policies that enhance land, resource and cultural rights while providing new techniques for addressing climate change. In countries like Panama and the Ivory Coast, drones are being used to help accurately map forest cover and indigenous territories to better support land ownership rights. These cooperative efforts focusing on rights are essential to slowing the rampant rate of deforestation across the world. A 2018 study of 28 nations compared lands controlled by indigenous groups against government-managed protected zones. It found that considerable investment, equivalent to $1.71 billion, was undertaken by indigenous groups. This protection and rehabilitation are essential to storing aboveground carbon and limiting the effects of climate change.

Nonetheless, governments must understand the varying needs and wants of different groups. Some are especially isolated from the rest of the world and wish to keep it that way. Others interact with the public regularly and in some cases wish to be more aligned with new technologies or business. Therefore, blanket one-size-fits-all policies or investments cannot work for all indigenous communities, context certainly matters. In North America, impact investing is gaining popularity. Newly established funds, such as the indigenous equity fund in Canada, seeks to support local enterprises that often lack start-up capital as a result of colonisation that caused a “stripping of wealth and inability to create intergenerational wealth.” As businesses then grow, the provision of jobs and services spreads, making it an attractive option for impact investors.

The Centre for Social Innovation & Impact Investing released a 2018 report on impact investing in the indigenous context. They highlighted barriers to both sides. For investors, there is a knowledge gap in their cultural understanding, the highly fragmented market could mean access to opportunities is limited, and the mismatch between investor type and opportunities could leave retail investors out of the market. For indigenous groups, a key barrier is trust. Centuries of colonialism has led to understandably shaky trust – a challenge that requires time and effort in the relationship-building process to overcome. Equally, small Indigenous communities may lack the capacity to scale up or have the financial expertise to manage external investment. Nonetheless, the report concluded that “there is strong unrealised potential for impact investing to develop new investment markets that are aligned with traditional indigenous values.” With that said, collaborations must be well thought through and investors must exercise caution to not repeat previous exploitation.

There is also the argument that the best way to support indigenous groups is to simply not support the companies that exploit them. Certainly, the rise in popularity of ESG measures increases the transparency of company behaviour and helps raise the profile of indigenous groups. Yet, we still see a worrying disparity between harmful actions and investor sentiment. One recent example of this is Rio Tinto, the mining company responsible for the collapse of two 46,000-year-old caves of cultural significance to Aboriginal Australians in a bid to expand their operation. Their initial response to withhold bonuses was rightly met with criticism, leading to the resignation of CEO in recent weeks. Still, the company’s stock price that has risen by over 20% since the explosions occurred.

True sustainable development is not possible without the knowledge and understanding of indigenous groups. Their capacity to adapt to changing environments without the financial resources of the outside world proves the value of their experiences. Governments committed to tackling climate change and environmental degradation must therefore invest in the protection of indigenous groups and cooperate with them to successfully aid future progress.