SO WHAT IS TENURE RISK?
Tenure risk is the likelihood of a phenomenon in which local populations opposed to a land-based project - such as a dam, mine, mill or farm - impede or interrupt the project due to conflicting rights claims. The financial impacts of such disputes can be significant, leading in some cases to project cancellation or abandonment.
This risk is endemic to rural areas of emerging markets, where satellite imagery shows 93% of concessions to be inhabited and competition for resources is a literal matter of life and death. Human presence, together with often inefficient tenure systems and land rights’ recognition, increase the chances of disputes with project developers.
HOW CAN I MANAGE THIS RISK?
The best way to develop a social license to operate, or more simply win the trust of local people, is to engage them directly in open, regular and meaningful dialogue. This often means going beyond basic legal compliance and referring instead to the interests of local people as a guide.
Our research shows clearly that compensation alone is insufficient - just 7% of the disputes we looked at where primarily driven by this issue. The solution is to find the right operational footing: this means bringing the unrecognized counterparty of project affected people to the table.
If that sounds messy, expensive or distracting, it is because it can be – if not done properly. The information provided in the Ian tools delivers a cost-conscious, time-bound management plan for getting it right.
WHY DID YOU FOCUS ON TENURE RISK AND NOT OTHER ESG PROBLEMS?
Current approaches to tenure risk are objectively dysfunctional. IAN addresses clear problems in both the assessment (via IAN Risk) and management (via IAN Diligence) of this problem.
The motivation for IAN Risk is to collapse an asymmetry in data, which is making it hard for investors to make informed and responsible decisions on land and resource rights. It is also designed to remove the financial and technical barriers to quantitative and geospatial risk assessment. As a result, these methods can be employed by a wider set of actors at an earlier stage in an investment.
IAN Diligence is based on our skepticism about the typical approach to managing tenure risk. Specifically, many current approaches focus on delivering compensation for land taken from people but, as noted above, this is ineffective we need new processes to define what issues are causing the problem and how to address them. IAN Diligence therefore works to help investors and companies recognise where local people can be an asset in project development, rather than an obstacle to it.