Examining Legal, Regulatory and Social Risks to Investment in the Energy Sector

by Ishita Pant

Abstract

(Added 26/02/2020) Today national governments face substantial challenges as new priorities are gaining prominence. Governments must design and implement effective policies that exploit synergies and manage trade-offs. Scaling up investments in sustainable energy resources and new technologies is critical. At the same time, the existing infrastructure and conventional energy resources must be maintained and developed to avoid stranded investments. To help governments reconcile these diverging- and at time competing- priorities, in 2018, the Energy Charter Secretariat launched its flagship publication, the Energy Investment Risk Assessment (EIRA). 30 countries participated in this pilot version, and the number rose to 34 in the 2019 edition. The geographical reach of the EIRA is extensive and spans countries in Africa, Asia, the Americas, and Europe. The Report evaluates specific risks affecting energy investment that can be mitigated through adjustments to policy, legal and regulatory frameworks. Compliance with domestic laws of their host states is one of the primary obligations of investors, but nowadays, obtaining and sustaining the acceptance of the civil society has also become critical for companies, particularly in the extractive sector. In recent years, it has become increasingly important to identify the norms and standards investors should observe to avoid potential conflicts with the civil society. The first part of this paper will discuss specific risks that investors may face because of governmental actions in the legal and regulatory space. The author will utilize the EIRA report of the Energy Charter Secretariat to identify these risks and summarise measures the governments may take to mitigate these. The second part of the paper will discuss the relatively softer, but equally relevant, norms on business and human rights, why companies should conform to these, and how investors can meet societal expectations regarding the environmental, social and cultural performance of industries. The final section summarises the findings and highlights how states can ensure good governance and retain investor confidence, how investors can adapt to changing legislative landscapes and ensure business success by engaging constructively with local communities.

You can download the paper "Examining Legal, Regulatory and Social Risks to Investment in the Energy Sector" here www.ogel.org/article.asp?key=3860.