As a result, the ability of these projects to secure the support of Indigenous communities, including involving those communities as investors, “stands to play a more pivotal role in mitigating risks and upholding a project’s credit quality,” it said.
“Without partnerships, projects on Indigenous territory can lead to Indigenous opposition, posing risks of cost overruns, reputational damage, litigation and project termination,” Moody’s noted.
Firms that fail to recognize the jurisdiction and environmental concerns of Indigenous communities, “stand to face increased challenges navigating an evolving regulatory landscape,” the report said.
“Difficulty with the environmental permitting process, which increasingly involves active Indigenous participation, poses particular project risks,” it noted — as this can lead to trouble obtaining permits, legal challenges and projects being cancelled.
“Engagement that results in equity participation by Indigenous communities will remain a reliable way to obtain their backing and avoid potential delays and other hurdles in the approval and ensuing processes, which could adversely affect a project’s credit quality,” it said — adding that the participation of Indigenous communities as co-investors and developers has other environmental and social benefits too.
“Benefits include economic development, capacity building, protection of cultural heritage and alignment with environmental values,” it said.
The importance of winning the support of Indigenous communities may increase as the United Nations’ Declaration on the Rights of Indigenous Peoples (UNDRIP) and the principles of Indigenous free, prior and informed consent (FPIC) gain increased traction in Canada — following a ruling last year by the Supreme Court of Canada, which found that compliance with UNDRIP is required under federal law, it said.
While the provinces don’t have to adopt these principles, several provinces, led by British Columbia, have started to incorporate them into provincial law.
“Even when provincial laws do not align with UNDRIP or mandate FPIC, provinces and corporations are increasingly recognizing that early and meaningful engagement with Indigenous communities that generates their support or leads to equity stakes can help mitigate project risks,” it said.