Incorporating Climate Considerations Into Investment Assessment Processes: Guidance for National and Local Governments
Climate change poses an existential threat to ecosystems, with potentially far-reaching impacts on agriculture, forestry, wind and solar energy, and other land-based investments. These investments can also further exacerbate detrimental climate change impacts if they are not sustainably implemented.
Governments are well-positioned to ensure land-based investment decision-making instead contributes to global and national climate strategies, plans, and policies. This can be achieved through incorporating climate considerations into Investment Assessment Processes (IAPs), which include the full range of legal frameworks and associated processes that establish the requirements investors must meet to be allowed to operate their proposed project, spanning from investor registration with the relevant government agency to investor preparation of contracts and agreements for project approval.
This guidance document provides recommendations to national and local governments on how to incorporate climate considerations into the IAP and, to a lesser degree, prior and subsequent stages of the broader investment lifecycle. At a minimum, governments should:
- Create an enabling environment for climate-aligned investment through coordinated institutions, law, policies, processes and incentives.
- Screen proposed investments for approval, conditional approval, or rejection based on the climate risks to and climate threats of a given investment, among related factors.
- Conduct or oversee consultations with project-affected collectives, including Indigenous Peoples’ and marginalized local communities, respecting each collective’s unique tenure and human rights under international and national law.
- Conduct in depth technical, legal, economic, environmental and social feasibility studies which assess how climate change might affect the planned project or its results.
- Coordinate and oversee climate-aligned environmental and social impact assessments (ESIAs) that holistically evaluate a project’s overlapping social, human rights, climate, and other environmental impacts in local and global contexts.
- Oversee or participate in negotiations and contracting between investors and the project-affected collective which set out the rights and obligations of all stakeholders in the relevant national, local, and project context with respect to climate-related laws.
- Oversee project implementation, monitoring and compliance to assess investor compliance with climate obligations; and
- Establish project closure requirements for the investor to address any investment-related climate impacts and to rehabilitate and return land to the host People or community.
Allocating time and resources toward designing and implementing a climate-aligned IAP helps governments mitigate severe local and global climate risks with grave social, economic, and environmental costs. Implementing the recommendations in this guide may be challenging for time- and resource-constrained governments, but these efforts are likely to pay off in developmental, financial, resource, and reputational benefits.
Read the full guidance here.
This resource was produced as part of ALIGN, funded by UK Aid from the UK government