A Launchpad for Deeper Analysis into the Business Case for Respecting Human Rights in Land-Based Investments

The business case for responsible land-based investment (LBI) posits that harming local communities and the environment harms a company’s bottom line, and that investors can avoid a range of financial risks by addressing adverse impacts associated with LBIs they finance, operate, or otherwise have a business relationship with. Despite the research backing this argument (see a snapshot of findings below), over 500 of the world’s most influential companies in the extractives and food, agriculture, and forestry sectors are, on average, only 25 percent of the way towards meeting social indicators on human rights, decent work, and ethical conduct, as established in the UN Guiding Principles on Human Rights (UNGPs), the 2030 Agenda, ILO standards, and other international frameworks. 

Recent exploratory research suggests that a foundational underpinning of the business case argument—that investors will respond best to human rights arguments that directly correlate their social and financial performance—may not be as uniquely compelling to investors as assumed. A survey of over 200 professionals and managers in business and government found that respondents exposed to the business case did not express a stronger commitment to corporate sustainability than those exposed to appeals to make socially beneficial decisions. This may be tied to investor skepticism of metrics on the rewards of good practice, (which are typically realized in long-term horizons), the limitations of risk prevention arguments (seeing as investors are constantly taking measured risks), and corporate leaders’ underrecognized enthusiasm to have a positive impact in the world (in some cases). 

This is not to say there is a total lack of movement toward improving the human rights impacts of investments—see, for instance, respect for land and human rights across Illovo Sugar’s operations in sub-Saharan Africa, or meaningful and inclusive engagement, decision-making, and conflict resolution processes underpinning the First Nation co-owned Okikendawt Hydro Power Project in Canada. In instances of good practice, to what extent does the business case play a role? How is the argument leveraged, and which actors are involved? Case studies and macro-level explorations into these questions can fill gaps in research on the effectiveness of the business case argument to target audiences.

Another grey area in the literature pertains to the potential inadvertent impacts of deploying or overly relying on the business case argument. Does the argument monetise the consequences of human rights abuses (e.g., earnings foregone or costs incurred from investment delays, legal fees, etc.) in a way that companies absorb them into operating costs without changing their behavior for the better? Furthermore, rather than encouraging proper community-company engagement, does highlighting the financial risks of community-company conflict in developing countries instead discourage investment in these countries altogether? 

While the observations highlighted above suggest a need for further research into the effectiveness of the business case as an argument, there is an existing body of evidence on the business case itself, e.g., studies measuring the financial implications of corporate human rights performance. As a launchpad for further inquiry into the deployment of the business case argument for rights-respecting LBI, CCSI has prepared a snapshot of business case research in LBI sectors. Evidence is organized by the two main angles through which the business case is presented in the literature: 

1. Estimating financial losses from human rights abuses associated with LBIs that result in:
   1. Operational interruptions or delays, and project cancellation,
   2. Legal action and proceedings, and/or
   3. Reputational damage.
2. Estimating the financial benefits of rights-respecting business conduct for LBI. 

Research summaries in the Findings snapshot below detail source methodologies and limitations. Two general limitations in the field are (1) the inaccessibility of confidential corporate and financial information, and (2) the challenge of drawing direct links between human rights violations and precise financial or market impacts, given the plurality of interacting factors affecting corporate profits and valuation at any given moment. 

The non-exhaustive snapshot opens with a few select points on the social and environmental impacts of LBI to help contextualize findings. Research summaries note the sectors and regions represented. Given that business case arguments are targeted at investors, we have prepared a rough sketch of the select interests, concerns, and vulnerabilities of relevance for major real-economy and financial investors. Each group of actors is not a monolith, and the motivations of sub-actors within each group differ (e.g., managers, lawyers, and social engagement teams within operating companies). Furthermore, each entity’s priorities vary depending on sector, home country or region, organizational culture, and other factors. This broad overview in the table below is intended to complement the Findings snapshot by lending insight into the relevance of different pieces of research and elements of the business case argument for specific actors.

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Operating companies

• Seek to meet quarterly or annual production targets, particularly if bonus or reward schemes for managers are tied to the operation’s successful production in line with project timelines and budgets.
• Seek to achieve a social license to operate to mitigate project conflict, delays, and cancellations.
• Seek to abide by the host state’s domestic regulations to mitigate legal and associated financial and reputational risk.
• In extreme cases of conflict with communities, may abandon a project temporarily or permanently by activating a force majeure, the nature of which is dependent on relevant contractual provisions.

Parent companies

• Seek to maximize returns within anticipated timelines from their subsidiaries, in which they often hold significant or majority shares.
• Subject to limited legal risk, as in many jurisdictions, they are protected from being held legally accountable for a subsidiary’s human rights violations through the legal separation of entities and the ‘limited liability’ shield.
• Name recognizability makes them subject to reputational risk when named in reporting on their or their subsidiaries’ violations.

Suppliers, contractors, and other companies involved in an LBI value chain

• A varied group that can have a significant or limited role in the operating LBI.
• Seek to keep their costs low to maintain interest from buyers (operating companies).
• Rely on the sustained profits of their buyers, who can slash expenditures on suppliers should they face financial losses.
• Contractors may be unwilling or unable to bear the financial costs of conflict-induced delays or work stoppages and may activate a force majeure in the event of community conflict, potentially claiming a penalty payment from the operating company as per their agreement.

Commodity trading firms

• Seek to extract maximum profits from the processes of commodity production, transformation, storage, and sale, making them vulnerable to operational risks across commodity chains, as disruptions at any stage can cut into their profits.
• Seek to mitigate risk through diversification across commodities.
• Susceptible to reputational risk as they are consumer-facing.

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Institutional investors (e.g., sovereign wealth funds or pension funds) 

 

• Seek to maximize long-term investment performance and generate returns for their beneficiaries.
• May consider themselves responsible for having a positive real-world impact.
• Look toward external trends (social, environmental, political, regulatory, etc.) to identify risk and return targets, preferred investment horizons and opportunities, and other dimensions of their long-term investment strategy.
• May see responsible investing as part of their long-term risk management strategy.
• Often hire asset managers, over whom they may hold significant leverage.

Asset managers

• Serve institutional clients, large businesses, foundations, and retail clients, like high-net-worth individuals.
• Seek to achieve maximum returns and protect assets against inflation in the long term.
• Diversify investments across geographies, sectors, and asset classes to manage portfolio risks.
• Seek to make evidence-informed decisions and meet the interests of their clients, which may include social or environmental well-being.
• Influence operating/parent companies through proxy voting and shareholder meeting participation. 

Lenders

• May look at a prospective borrower’s track record and policies and processes for preventing, addressing, and resolving conflicts and community grievances.
• May attach environmental and social conditions to a loan.
• Given susceptibility to reputational damage, may avoid credit relationships with companies that could tarnish their name.

Insurers 

• To avoid reputational risk, may reject clients over their human rights violations.
• May look for clients who are willing to engage with project-affected communities.
• Insurance companies Axis, Allianz, and Swiss Re have adopted policies on Indigenous rights and Free, Prior and Informed Consent (FPIC), with Axis explicitly refusing to insure projects on Indigenous territories without FPIC. 

Findings snapshot 

A glimpse of the social and environmental context and impacts of land-based investment (LBI)

Finding: An assessment of thousands of LBIs across Latin America, Sub-Saharan Africa, and Southeast Asia found that communities were present in 92–100 percent of concession territories within each of the eight countries analyzed. Researchers analyzed 72,097 shapefiles of mining, oil/gas, agriculture, and forestry concessions ranging in size. For concession data, researchers relied on various publicly available sources documenting concessions for palm oil, agriculture, forests, logging, oil and gas, and mining, which were either available in or converted by researchers to GIS format. For population data, researchers relied on the Oakridge National Laboratories’ LandscanTM dataset and data from the Socio-Economic Data and Applications Center (SEDAC). 

There were some overlaps between concessions, though researchers claimed that this did not have a significant effect on the study results–the maximum concession overlap was 1.45% of the country area (Peru). 

Sector: Land-based sectors

Region: Latin America, Sub-Saharan Africa

 

Finding: A 2022 study found a substantial overlap between Indigenous lands and energy transition mineral (ETM) projects globally. 29% of ETM projects were found to be located in areas managed or owned by Indigenous Peoples, including where their land tenure is officially recognized by the State and/or where they have a substantial influence over land management. This finding emerged from layering a global map of terrestrial lands managed or owned by Indigenous Peoples and a selection of ETM projects in the S&P Capital IQ Pro database. Additional layering to include areas in which a significant portion is likely to be used or occupied by Indigenous Peoples suggested an additional 25% (for a total of 54%) of ETM projects globally overlapped with Indigenous lands. These additional areas were estimated by their remoteness and potential for collective land tenure, as signified primarily by an absence of industrial modification in Global Human Settlement data from the European Commission and the Koppen-Geiger climate classification map.

Sector: Critical minerals, extractives

Region: Global 

 

Finding: A World Bank survey of 39 large-scale, mature agribusiness investments in Sub-Saharan Africa and Southeast Asia found that the most reported negative impact of investments was impaired access to land for surrounding communities. 

Other community grievances included companies’ failure to deliver on commitments to communities, land acquisitions overlapping with community forests and sacred sites, and communities being denied access to land they had historically occupied and cultivated, some of which investors had abandoned. 

Stakeholders, on average, reported a majority positive impact of investments, particularly related to the socioeconomic benefits of job creation, social services (e.g., education), and infrastructure development.

Researchers interviewed senior management at each investment site and conducted additional interviews with over 550 external stakeholders in total across sites. They also analyzed investment contracts and other project documents. Despite the extensive data collection, researchers note that the study presents a snapshot look at several projects at a particular point in time (March 2012 to August 2013) and that further investigation into certain investments or issues identified would generate valuable insights. 

Sector: Agriculture

Region: Sub-Saharan Africa, Southeast Asia

 

Finding: A Business and Human Rights Resource Center (BHRRC) assessment of top companies in renewable energy value chains found that the 19 most powerful wind and solar energy developers all scored between 6 to 34 percent on their human rights policies and practices against international standards. This scoring was based on:

• Companies’ performance against United Nations Guiding Principles (UNGP) core indicators and salient human rights risks indicators for Indigenous Peoples and affected communities’ land and resource rights, labor rights, rights to a safe and healthy environment, and related rights.
• Allegations against companies and their response to allegations in terms of statements, actions, and engagement.
• Companies’ “Assessing Low-Carbon Transition” (ACT) scores, which measure a company’s past and projected emissions and their alignment with 1.5 Degrees C sectoral pathways developed by the Science Based Targets Initiative.

BHRRC aimed to capture the largest wind and solar developers and those of strategic and regional importance. Developers were selected for inclusion in the analysis based on (1) results from a questionnaire completed by 85 key stakeholders from 58 entities in the field (including civil society, companies, and investors), and (2) the total installed project capacity of developers. 

Sector: Renewable energy (wind and solar)

Region: Global

 

Finding: The BHRRC Transition Minerals Tracker captures publicly reported allegations of environmental and human rights abuses against companies mining one or multiple of the main minerals used in energy transition technologies—bauxite (since 2024), cobalt, copper, lithium, manganese, nickel, and zinc. Across the 160 companies and 220 mining operations tracked, 630 human rights allegations related to transition mineral extraction were recorded between 2010 and 2023. The tracker, updated on an annual basis, pulls from publicly available international and local media sources, NGO reports, and records of lawsuits/regulatory action to capture allegations in the following categories: environment, local communities, workers, governance and transparency, security issues and conflict zones, and COVID-19. 

The tracker only captures “globally significant producing mines (or recently closed)” for each included mineral and does not verify the accuracy of allegations or corporate statements on actions taken to respond to allegations. 

Sector: Extractives, critical minerals

Region: Global

 

Estimating financial losses from human rights abuses associated with LBIs

Operational interruptions or delays, and project cancellation

Finding: In an exploratory study of how communal land ownership rights contribute to pre-financial close risks to wind energy development in South Africa, researchers distributed a peer-reviewed questionnaire to the 27 wind energy developers in South Africa involved in bid rounds for the government’s Renewable Energy Independent Power Producers Procurement Programme (REIPPP). Five developers responded to the questionnaire and reported on their collective 43 projects, 23 percent of which were initiated on communal land and 77 percent on privately-owned land. Of those projects they initiated on communal land, all developers faced delays from communal land disputes, four faced project stoppage, and one experienced a loss of equipment.

Researchers attributed the limited number of successful questionnaire respondents to some players’ discomfort in disclosing company information, given the developing, competitive nature of the sector. In some instances, follow-up phone interviews with respondents were conducted. Questionnaire and phone interview data were contextualized with desktop research on topical academic literature, government publications, and other industry-specific secondary data sources.

Sector: Renewable energy (wind)

Region: Sub-Saharan Africa

 

Finding: A study modeling 29 cases of tenure disputes in the African agricultural sector found that operational delays in launching or rolling out operations were the main source of corporate financial losses associated with tenure disputes. Researchers found 13 of the 29 disputes resulted in delays of over 500 days, and six in delays of over 1000 days. Of these six, all but one project were cancelled or disposed of. The models drew from interviews and/or written/verbal engagement with companies and publicly available information in literature and conflict databases on tenure disputes.

Using the modeled cases, the researchers created the Tenure Risk Tool (TRT), a discounted cash flow financial model that can be used to estimate location-dependent delays as a result of tenure disputes and calculate the impact of the delay on the net present value (NPV) of the investment under different scenarios. The tool incorporates an “uncertainty score” reflecting the location-specific risk of a project and does not incorporate macroeconomic factors. 

Researchers used the TRT to generate baseline cash flow examples, drawing from real data, for eight projects across the oil palm, sugarcane, rice, and coffee sectors. They observed the following trends in terms of losses from delays induced by tenure disputes: 

• Losses as a percentage of base case NPV were indirectly proportional to project size (i.e., smaller projects faced higher losses).
• Losses for greenfield investments, on balance, were typically higher than those for brownfield investments, but the range of losses for brownfield investments was as wide or wider.
• Losses from tenure disputes were more severe at lower discount rates, decreased as discount rates rose, and eventually plateaued. 

Sector: Agriculture

Region: Africa

 

Finding: An analysis, using the Tenure Risk Tool (TRT), of 80 businesses and 90 cases of land tenure conflict throughout the agriculture supply chain in Sub-Saharan Africa found that tenure disputes at sugar plantations in Kenya, Malawi, and Tanzania resulted in average losses from delayed operations of USD 29.4 to 100.9 million in foregone revenues, dependent in part on the size of the operation. These losses do not account for the additional costs of managing land tenure disputes or adverse social and environmental impacts on the ground.

The TRT is a discounted cash flow financial model that can be used to estimate location-dependent delays as a result of tenure disputes and calculate the impact of delays on the net present value of the investment under different scenarios. See the box above for more information on the TRT.

Sector: Agriculture (sugar)

Region: Sub-Saharan Africa

 

Finding: A Columbia University study summarized eight touchstone cases of investors experiencing “measurable increases in credit risk” after a high-profile incident violating environmental, social, and governance (ESG) principles. These incidents included the catastrophic failure of Vale’s Mariana Dam in Brazil in 2015 and Goldman Sachs’ 2018 corruption scandal with Malaysia’s investment fund. Researchers generalized the correlation of ESG risk and credit risk demonstrated in the case studies with two sector-level analyses. 

One sector-level analysis explored the relationship between Indigenous land claims and credit risk to infrastructure projects. Drawing from a dataset of 255 infrastructure projects (receiving USD 121.5 billion in credit), researchers found that five material credit events—including halts to operations—increased by as much as 500 percent for projects within 10km of an Indigenous land claim compared to those projects more than 500 km from a land claim. 

Researchers also sought to analyze how a project’s proximity to an Indigenous land claim—and associated material credit events—affected its cost of capital, hypothesizing that those projects closer to land claims would face higher costs. 

For the dataset of 255 projects, researchers conducted a yield spread analysis of the corporate bonds issued by publicly traded parent companies to the infrastructure projects. They found bonds were less favorable to those within 10 or 50 km of an Indigenous land claim. Credit yield spreads for these companies were 50 to 60 basis points above otherwise identical projects, controlling for sector, country, distribution method, and whether creditors were subordinated. However, using a broader dataset of 1,444 infrastructure projects (receiving USD 1.4 trillion in credit), researchers found no evidence suggesting that projects had a higher cost of borrowing at the project-finance level if they were operating closer to an Indigenous land claim. 

The dataset of 255 projects consisted of those included in the ThomsonOne DealScan dataset that (1) researchers could geocode, (2) had publicly traded parent companies, and (3) were reported on in the Capital IQ financial database regarding the incidence of several material credit events. The 1,444 projects in the broader dataset were those included in the ThomsonOne DealScan dataset that researchers could only geocode. 

Sector: Infrastructure 

Region: Global

 

Finding: A Harvard study involving an analysis of 50 case studies of significant community-company conflict in the extractives sector, 45 confidential interviews with industry experts, and field research on the organizational factors that influenced five mining companies’ approaches to handling conflict, found: 

• Multiple interviewees claimed, and project financial data analysis confirmed, that a mining project with USD 3–5 billion in capital expenditure can expect to lose USD 20 million per week in net present value terms as a result of conflict-induced delays. These losses are largely a result of forfeited sales associated with delays. At early project stages, interviewees estimated losses of between USD 10,000 (initial exploration) and USD 50,000 (advanced exploration) for every day of a conflict-induced delay.
• Asset managers could spend 30 to 50 percent of their time managing social risk, despite the working assumption that it should only be five percent.
• One senior operational manager reported spending two-thirds of his time managing internal staff and external community issues resulting from conflict when operating in challenging locations. One CEO reported pulling out of a joint venture that demanded 90 percent of senior management time, while only providing 10 percent of the company’s income. 

Despite these compelling observations, interviewees also noted the challenges and limitations of quantifying financial rewards from community support and losses from community conflict. Multiple interviewees noted that “zero blockades” does not equate to successful community engagement the same way “zero incidents” equates to good safety performance. Furthermore, actual project costs often exceed initial projections, and it can be challenging to precisely attribute additional expenditures to community conflict. 

Case study research drew from publicly available information. Research interviews were conducted between 2010-2011 with individuals from extractive companies, industry bodies, corporate law firms, lenders and insurers, and research institutes.

Sector: Extractives

Region: Global 

 

Legal action and proceedings

Finding: A UNDP study synthesizing available evidence on economic arguments for corporate human rights respect identified “the costs to businesses arising from human-rights related domestic and transnational litigation” as a key argument. Researchers went beyond the obvious direct costs to businesses from paying court or settlement awards to plaintiffs. Regardless of whether or not corporate defendants are found guilty in court, they identified the following generalized costs of litigation: 

• Depending on the jurisdiction, corporate defendants may face limited or lost opportunities from restrictions on operating in certain areas or exclusion from public procurement.
• Litigation on social, environmental, or human rights grounds may negatively affect credit ratings and access to capital, thus resulting in an increased cost of capital for project financing.
• Corporate information disclosure requests, either for evidence in court litigation or as a result of increased activism against accused companies, can snowball into a range of costs for companies, especially as all such requests typically aim for the release of maximum possible information. For instance, activists may launch internet campaigns, release articles and documentaries, or initiate boycotts, divestment campaigns, and protests. They may also pressure regulators and investors to take action against companies. 

Research informing the study consisted of extensive desk research on relevant qualitative and quantitative secondary sources (e.g., research reports, court cases, media reports, legislative documents, etc.) across disciplines, sectors, and regions. While this global, cross-sectoral scope enabled researchers to draw out general conclusions applicable to many contexts, there are two primary limitations to their approach: (1) a lack of case studies drawing on primary qualitative or quantitative data, and (2) a lack of detail on economic drivers specific to different contexts (e.g., sector, region, entity, etc.). 

Sector: All sectors

Region: Global

 

Finding: A Columbia University study summarized eight touchstone cases of investors experiencing “measurable increases in credit risk” after a high-profile incident in which they violated environmental, social, and governance (ESG) principles. These incidents included the catastrophic failure of Vale’s Mariana Dam in Brazil in 2015 and Goldman Sachs’ 2018 corruption scandal with Malaysia’s investment fund. Researchers generalized the correlation of ESG risk and credit risk demonstrated in the case studies with two sector-level analyses. 

One sector-level analysis explored the relationship between Indigenous land claims and credit risk to infrastructure projects. Drawing from a dataset of 255 infrastructure projects (receiving USD 121.5 billion in credit), researchers found that:

• Five material credit events—including inquiries from regulatory agencies, regulatory enforcement actions, and lawsuits/legal issues—increased by as much as 500 percent for projects within 10km of an Indigenous land claim, as compared to those projects more than 500 km from a land claim.
• Those that had parent companies who rated poorly on Indigenous rights management ability or performance, as indicated in independent private ratings sources such as Morgan Stanley Capital International, RepRisk, Sustainalytics, and TruValue Labs, faced incidences of material events that were three to 66 times higher. Those with parent companies with better social performance beyond just Indigenous rights metrics also experienced a smaller increase in the incidence of material events.

Results were inconclusive regarding whether and how a parent company’s rating on Indigenous rights management ability or performance, as indicated in the same independent private ratings sources listed above, correlated with the cost of capital for the subsidiary’s infrastructure project.

The 255 projects in the dataset were those included in the ThomsonOne DealScan dataset that (1) researchers could geocode, (2) had publicly traded parent companies, and (3) had reporting on the incidence of several material events included in the Capital IQ financial database. 

Sector: Infrastructure

Region: Global 

 

Finding: In an exploratory study of how communal land ownership rights contribute to pre-financial close risks to wind energy development in South Africa, researchers distributed a peer-reviewed questionnaire to the 27 wind energy developers in South Africa involved in bid rounds for the government’s Renewable Energy Independent Power Producers Procurement Programme (REIPPP). Five developers responded to the questionnaire and reported on their collective 43 projects, 23 percent of which were initiated on communal land and 77 percent on privately-owned land. For those projects initiated on communal land, four developers said they encountered legal risk, with three saying their projects faced legal action and land claims/disputes.

Researchers attributed the limited number of successful respondents to some players’ discomfort in disclosing company information, given the developing, competitive nature of the sector. In some instances, follow-up phone interviews with respondents were conducted. Questionnaire and phone interview data were contextualized with desktop research on topical academic literature, government publications, and other industry-specific secondary data sources.

Sector: Renewable energy (wind)

Region: Sub-Saharan Africa 

 

Reputational damage

Finding: A UNDP study synthesizing available evidence on economic arguments for corporate human rights respect identified “the costs to businesses arising from human-rights related domestic and transnational litigation” as a key argument. Among other litigation costs (see above), researchers considered the costs of litigation-related reputational damage. Regardless of whether the corporate defendant wins, loses, or settles, negative publicity surrounding a lawsuit can motivate customers, creditors, business partners (e.g., suppliers), and current or prospective employees to avoid or distance themselves from the company. This can result in lost revenue, increased cost of capital, loss of critical value chain partners, and challenges in attracting and retaining talent. 

Research for each driver consisted of extensive desk research on relevant qualitative and quantitative secondary sources (e.g., research reports, court cases, media reports, legislative documents, etc.) across disciplines, sectors, and regions. While this global, cross-sectoral scope enabled researchers to draw out general conclusions applicable to many contexts, there were two primary limitations to their approach: (1) a lack of case studies drawing on primary qualitative or quantitative data, and (2) a lack of detail on economic drivers specific to different contexts (e.g., sector, region, entity, etc.). 

Sector: All sectors

Region: Global

 

Finding: Drawing on 20 years of data on activist assassinations worldwide, an Oxford study examined how “naming-and-shaming” media campaigns employed by civil society impact multinational mining companies’ financial performance. Publicly listed parent firms associated with environmental activist assassinations in the news lost, on average, USD 100 million in market capitalization in the 10 days following the story breaking. Negative impacts started on the day following the assassination and increased in the subsequent 10 days. However, if the assassination reporting coincided with more active news cycles and was thus crowded out in the media, the market capitalization losses for the “associated firms” disappeared.

The full dataset included 354 assassinations (496 victims) that occurred between 1998 and 2018. Assassination event news was collected from international full-text media database archives. “Associated firms” identified in reporting were connected to an assassination event only by their name, their subsidiaries’ name, or their operations being mentioned in reporting, and researchers did not measure or interpret any relationship beyond this. If neither projects nor firms were named in reporting, an assassination was not associated with a firm. 

Researchers conducted a classical event study (Study 1) and an Ordinary Least Squares (OLS) regression study (Study 2). Study 1 measured abnormal returns for the “associated firm” in the days before, during, and after the assassination news dropped, and used the firm’s returns in the absence of the event as a counterfactual. Results showed that negative effects started soon after, but not before, the assassination date and grew in magnitude and significance over time, with an average cumulative abnormal return (CAR) of -2.0 percentage points in the 10 days following the event. In Study 2, researchers estimated the difference in CARs for associated firms versus control firms, which operated in the same sector, event country, and event period, but were not identified in assassination reporting. A control company was identified for 92 events in the dataset. Leading up to the event, CARs were not significantly different between associated firms and control firms, yet by day 10 after the assassination, CARs dropped -2.2 to -2.4 percentage points for associated firms compared to their non-associated counterparts. 

Sector: Extractives

Region: Global

 

Finding: A Cambridge study assessed stock market reactions to media reporting on 345 acts of corporate misconduct in the United Kingdom, France, Germany, the Netherlands, and Belgium from 1995 to 2005. Researchers searched newspaper databases for all acts of corporate misconduct reported in the press in the five countries during the 10-year period. They narrowed their data to 345 events to avoid the impacts of confounding events and to exclude acts with missing or incomplete data. Misconduct was considered, and identified in newspapers as, “financial misrepresentation, accounting fraud, tax fraud, fraud, forgery, swindling, corruption, bribery, insider trading, insider dealing, market abuse, cartel, price fixing, anti-trust, monopoly, human rights violation, discrimination, environmental violations, environmental breach, environmental damage, and pollution.” Researchers found: 

• There was an average stock decline of about 1.4 percent for companies in the five days around the day their misconduct was made public.
• While the volume of media coverage of misconduct did not affect investor reactions, investors were found to react more negatively to coverage signaling clarity and credibility, but also, and somewhat contradictingly, to acts that were exposed at the “rumor” rather than the “formal investigation,” “court proceeding,” or “conviction” stage.
• Investors were also found to react more negatively when the coverage estimated the impact of the misconduct (i.e., when there was information on the initial or anticipated adverse impacts of misconduct).
• Negative investor reactions were more severe when the corporation was blamed, but less so when the corporation was blamed but the firm demonstrated independent governance, as measured by having a near or greater than majority of independent board directors (>41 percent).

Researchers caution that the dataset ends in 2005, at a time when social media was just taking off and forever changing the pace of reporting and the amplification of acts of misconduct. 

Sector: All Sectors

Region: Global

 

Estimating the financial benefits of rights-respecting business conduct for LBI

Finding: A study on the financial costs of mitigating social risks included (1) an analysis of the financial data of 137 Development Finance Institution (DFI) investments across 56 countries in Africa and Asia, including data on social and environmental risk mitigation expenditure, and (2) a synthesis of interview and survey responses from 85 private agricultural investors in sub-Saharan Africa on the topic of social risk.

Part 1 of the study revealed: 

• The vast majority (77 percent) of the 137 DFI projects analyzed spent four percent or less of their total expenditures on social risk mitigation, though there were outliers with risk mitigation costs upwards of 50 percent of total project costs.
• Over half of the DFI projects implemented social risk mitigation measures that researchers deemed good, superior, or excellent value for money. This meant that expenditure for the measures did not exceed 20 percent of the anticipated financial losses in the event of a delay, and the measures successfully paid off with no operational delays of more than a month.
• 97 of the 137 investments were deemed to be located in challenging locations. Of these 97, the majority did not experience significant delays (greater than one month) after implementing social risk mitigation efforts deemed good, superior, or excellent by researchers. 

Part 2 revealed that investors viewed establishing social dialogue with locals (e.g., through participatory monitoring processes and iterative investor-community meetings) as the most effective social risk mitigation strategy. All of the 85 investors consulted had social risk mitigation measures in place. 90 percent of investors identified such mechanisms as ‘very’ or ‘somewhat’ effective at establishing local trust and earning a social license to operate. 

Researchers caution that their study relied on DFI investment financial data, given its public availability, but on qualitative data from interviews with private business actors. 

Sector: Agriculture, energy, hydropower, infrastructure, sanitation

Region: Africa, Asia

 

Finding: Drawing from an extensive review of academic literature on Corporate Social Responsibility (CSR), several opinion polls and surveys of private firms, and interviews with staff in charge of human rights initiatives at Nestle, L’Oreal, and Reckitt (RB), the Danish Institute for Human Rights (DIHR) found that CSR serves as a risk management tool by:

• Improving firms’ resilience against macroeconomic shocks.
• Mitigating risks from collective stakeholder action against the company, including disruptions to production, boycotts, and legal action.

However, DIHR also found that the extent of corporate benefits from CSR is limited and typically dependent on several other factors. The financial rewards from CSR are modest, context-dependent across industries and social dimensions, more likely to be realized in medium- to long-term horizons, and dependent on a firm’s consistent track record of responsibility that demonstrates credibility to stakeholders. 

Sector: All sectors 

Region: Global 

 

Finding: A four-year partnership (2019–2023) between USAID and PepsiCo, advancing women’s empowerment in farming communities involved in the company’s potato supply chain in West Bengal, India, resulted in the following: 

• 67 percent of PepsiCo employees identified a lower potato rejection rate.
• 84 percent of women farmers reported an increase in farm yield.
• 1.7x rate of improvement in the company’s sustainability score across four years.
• Significant growth in PepsiCo’s farmer supply base.
• Improved brand perception and loyalty amongst farmers.

Despite these achievements, it was noted that strengthened collaboration among partnership stakeholders and/or improved data points on project results are needed to enhance and better assess achievement toward the following project objectives: intervention sustainability, women’s land ownership, equitable household worksharing, women’s representation across supply chains, and data monitoring processes. 

Sector: Agriculture (potatoes)

Region: South Asia

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Grace Brennan is a program associate at the Columbia Center on Sustainable Investment (CCSI). 

We welcome further engagement on this topic. Please reach out to Hansika Agrawal (ha2665@columbia.edu) and Esther Akwii (ea3078@columbia.edu).