Financing the energy transition with an Indigenous lens

More than half of the minerals needed to spur a green global economic transition are based on or near Indigenous lands. As mining companies and the investors backing them pump more resources and capital into extracting these critical minerals, “Indigenous inclusion is not a matter of ethics or compliance — it’s a strategic imperative for investors seeking to strengthen due diligence, performance and impact,” write US SIF’s Maria Lettini and First Peoples Worldwide’s Rebecca Adamson in a guide for investors financing the energy transition. 

“Sustainable indigenous finance: Navigating the energy transition,” aims to help investors “identify, assess and mitigate the investment risks” for energy transition projects on Indigenous lands. To underscore what’s at stake, it contrasts cases of mining companies that have excluded Indigenous communities from their business plans, and the consequential risks, with companies that have designed projects collaboratively, including through ownership and wealth-sharing models. 

In Australia, for example, iron ore miner Fortescue Metals is facing a $1.8 billion damages claim from the Yindjibarndi people over cultural and economic losses and destruction of sacred sites. A federal court decision, expected by 2026, could set a global precedent for Indigenous claims.

In contrast, Teck Resources has since the 1980s been working in partnership with Iñupiat-owned NANA Regional Corp. at Alaska’s Red Dog zinc mine, which supplies close to 5% of the world’s zine. The agreement shares up to 50% of the mine’s profits with NANA and has helped keep the mine operating continuously for more than 40 years.

“Companies need Indigenous peoples to manage their risk,” Adamson tells ImpactAlpha. With Lettini, she points out that Indigenous peoples “sit at the intersection of nearly every capital market industry. Economic growth across many sectors depends on Indigenous land stewardship, traditional knowledge, and equitable collaboration.”

Three-part approach 

More than half of the global minerals equity market is controlled by asset managers and the institutional investors who back them. Nearly three quarters of these investors are accelerating allocations to “transition minerals.”

In the current environment, increasing exposure to minerals could increase investors’ portfolio risk. Mining accounts for the greatest share of all environmental conflicts involving Indigenous Peoples worldwide. A study from Harvard’s Kennedy School, cited in the “Sustainable indigenous finance” report, found that conflicts with Indigenous communities can cost large-scale mining operations up to $30 million per week. A single power line blockade can cost $750,000 a day; supply route closures can cost $20,000 per day. 

US SIF and First Peoples Worldwide’s three-tier investment framework offers “a bona fide business case for Indigenous peoples’ rights” that helps institutional investors to identify, price and mitigate such risks.

At the institutional level, investors can develop policies that recognize Indigenous rights’ materiality to financial performance. Asset managers like CIBC Global Asset Management’s have designed their responsible investment frameworks to align with the UN Declaration on the Rights of Indigenous Peoples and other international standards.

At the portfolio level, investors can screen holdings with ties to Indigenous territories using tools like the Rebecca Adamson Indigenous Risk Index, a forthcoming data repository by First Peoples Worldwide and the Wharton School of Business featuring more than 5,000 public and private firms located on or near Indigenous lands.

At the project level, investors’ due diligence should include verification of “free, prior and informed consent”, or FPIC – an established principle affirming Indigenous peoples’ right to give or withhold consent for projects that may affect their lands, resources and livelihoods. Companies in Canada have signed more than 500 benefit agreements with Indigenous communities, which can serve as models for designing equitable partnerships.

“Institutional fiduciaries now have the opportunity to build portfolios that deliberately mitigate exposure and enhance long-term performance,” says Adamson.

The good, the bad, the ugly

In British Columbia, Polaris Materials granted the Hupacasath and Ucluelet Nations equity ownership and decision-making authority in the Eagle Rock Quarry, which supports the concrete industry. The collaboration shortened permitting timelines and cut remediation costs. It also created a template for future quarries once Polaris was acquired by US Concrete.

A counter-example: In Honduras, the $50 million Agua Zarca hydropower project was abandoned after it was discovered that the project developer, Desarrollos Energéticos, had ordered the assassination of Indigenous leader Berta Cáceres, who opposed the project.  

In Argentina’s Patagonia, the Mapuche Millaqueo co-developed the country’s first Indigenous-owned solar farm with Ecuador-based developer Meliquina. The Mapuche contributed land and labor, receiving equity and governance rights in return. The model proved so effective that it’s now being replicated across Latin America.

In Peru’s Amazon, three multinational operators — Occidental Petroleum, Talisman and GeoPark — of Oil Block 64 have walked away after years of local resistance. 

In the US, Navajo Power is modeling how to develop large-scale renewable energy projects on tribal lands so that the local communities see direct financial and resource benefits of the projects. 

Using an Indigenous investment lens, says Adamson, “aligns with institutional investors’ long-term responsibilities, and impact investors who are already prioritizing high-impact returns over short-term financial gains.”