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> *Columbia FDI Perspectives*
> Perspectives on topical foreign direct investment issues
> Editor-in-Chief: Karl P. Sauvant ([log in to unmask])
> Managing Editor: Riccardo Loschi ([log in to unmask])
> *The Columbia FDI Perspectives are a forum for public debate. The views
> expressed by the authors do not reflect the opinions of CCSI or our
> partners and supporters.*
> No. 325   February 21, 2022
> *How FDI in the mining sector can assist communities to achieve
> sustainable development*
> <>
> by
> James Otto* <#m_3602492134333003300_m_-3045558600984427616__edn1>
> The mine opens and extracts minerals for 25 years. Then it closes, and the
> site is rehabilitated as required by law. End of story? From the
> perspective of an international investor, this is often the case—a classic
> example of the boom-bust cycle associated with large mines. However, the
> immediate impact of closing a mine can be devastating to local communities,
> businesses and people that had depended on the project. Acknowledging that
> closure impacts can be mitigated, governments, extractive companies, civil
> society, and other stakeholders have developed approaches that target
> long-term sustainable development. These approaches, which can be
> contractual, seek to strengthen communities’ capacity to develop
> sustainable economic activities while mines are in operation, and that can
> be maintained after they close.
> Today, governments and industry have a stronger interest than in the past
> to achieve sustained development in communities affected by large projects.
> Increasingly, the trend is to move to a standardized, statutory approach to
> national investment regulation. Several tools are available now to promote
> immediate and sustainable development around mining projects. These include
> two complementary approaches: corporate social responsibility (CSR)
> programs and community development agreements (CDAs).
> *CSR programs*. Large mines have always played a role in local
> economies—directly, as providers of employment, local procurement and
> infrastructure; indirectly, through economic multiplier impacts. However,
> community expectations can be higher than this, and increasingly investors
> need to earn “a social license to operate” by gaining and maintaining the
> support of the local population.[1]
> <#m_3602492134333003300_m_-3045558600984427616__edn2> Most large mines
> today have voluntary CSR programs, often emphasizing immediate needs—for
> example, building a school, providing uniforms for the kids’ soccer teams
> or organizing immunization efforts. The strength of CSR programs is that
> they address immediate needs. However, well-designed CSR programs can, but
> do not always, address sustainable development, development that will
> prepare affected communities for after the operations close. For example,
> how will teachers in the investor-built schools work and be paid after
> investors leave?
> *CDAs*. As the name implies, a CDA focusses on development, which may
> include not only immediate community development, but also sustainable
> development to prepare communities for post-closure. Some CDAs are legally
> binding contracts; others take forms that are less enforceable. The parties
> to such agreements may include affected communities, the investors and
> possibly governments. Unlike CSR programs (that can be substantially
> unilateral, but need not be), CDAs are generally bi- or multi-lateral, with
> the obligations of the signatory parties defined in the agreements. CDAs
> may be required by statutory law (for example, where the mining law
> requires all large-scale mines to have a CDA) or created at the discretion
> of the interested parties. Over 40 jurisdictions now require CDAs for
> large-mining operations[2]
> <#m_3602492134333003300_m_-3045558600984427616__edn3> and more than 50
> impose some sort of community development effort.[3]
> <#m_3602492134333003300_m_-3045558600984427616__edn4> To aid governments
> in mandating CDAs, the World Bank has published an in-depth source-book
> on CDAs
> <>,
> including model mining regulations
> <>
> that set out recommended regulatory and CDA content requirements. Following
> the World Bank’s publication, the United Nations published an updated
> version
> <>
> of model regulations.[4]
> <#m_3602492134333003300_m_-3045558600984427616__edn5> Other organizations
> have published various best-practice CDA guidance, including on how to
> address implementation challenges.[5]
> <#m_3602492134333003300_m_-3045558600984427616__edn6>
> For governments that mandate CDAs, statutory law may address such topics
> as what types of projects are required to have CDAs, parties to agreements,
> mandatory agreement content, periodic CDA revision, negotiation capacity,
> agreement approval, alignment with government development plans, how new
> community members are to be handled, annual minimum expenditure and
> reporting requirements, penalties, and enforcement.
> Although statutory law may set out certain CDA requirements, the specific
> content of a CDA needs to be tailored to the situation. Typically, a CDA
> should include the agreement’s objectives; beneficiaries; the party
> managing the agreement; the person or body representing the community; how
> the community, including marginalized groups, will participate in
> decision-making processes and implementation; a development program plan;
> community consultations on mine-closure planning; obligations of the
> community to the investor; how and when CDAs will be reviewed and updated;
> consultative and monitoring frameworks; how funds made available under the
> agreement are disbursed, what accounts must be kept and by whom and
> reporting and auditing requirements; grievance and dispute-resolution
> provisions; and the process by which agreements may be modified. These
> elements are also described in detail in the above-mentioned model CDA
> regulations.
> The use of CSR and CDAs can (and should) play an important role in
> managing community expectations. They provide a means to achieve
> sustainable development for mine-dependent communities long after the mine
> ceases to operate.
> ------------------------------
> * <#m_3602492134333003300_m_-3045558600984427616__ednref1> James Otto (
> [log in to unmask]) is the former Director and Professor of the
> Environmental and Natural Resources Advanced Degree Program at the
> University of Denver Sturm College of Law. The author wishes to thank Boris
> Dolgonos, Perrine Toledano and Louis T. Wells for their helpful peer
> reviews.
> [1] <#m_3602492134333003300_m_-3045558600984427616__ednref2> Anne B.
> Read, “Defending home: How resistance movements are framed against mineral
> extraction in Cajamarca and Tambogrande, Peru,” *International
> Development, Community and Environment* (IDCE) (2017), p. 18
> <>
> .
> [2] <#m_3602492134333003300_m_-3045558600984427616__ednref3> James Otto,
> “How do we legislate for improved community development?,” WIDER Working
> Paper 2017/102, April 2017, pp. 8 and ff.
> <>
> [3] <#m_3602492134333003300_m_-3045558600984427616__ednref4> See IISD,
> Mapping community development requirements in the mining sector database
> <>
> .
> [4] <#m_3602492134333003300_m_-3045558600984427616__ednref5> See Otto, *op.
> cit.*, pp. 19-28.
> [5] <#m_3602492134333003300_m_-3045558600984427616__ednref6> See, e.g., Jennifer
> Loutit, Jacqueline Mandelbaum and Sam Szoke-Burke, “Emerging practices in
> community development agreements,” Columbia Center on Sustainable
> Investment, February 2016
> <>
> .
> *The material in this Perspective may be reprinted if accompanied by the
> following acknowledgment: “James Otto, ‘How FDI in the mining sector can
> assist communities to achieve sustainable development,’ Columbia FDI
> Perspectives No. 325, February 21, 2022. Reprinted with permission from the
> Columbia Center on Sustainable Investment (***
> <>*).”
> A copy should kindly be sent to the Columbia Center on Sustainable
> Investment at **[log in to unmask]* <[log in to unmask]>*.*
> For further information, including information regarding submission to the
> *Perspectives*, please contact: Columbia Center on Sustainable
> Investment, Riccardo Loschi, [log in to unmask]; Luca Jobbagy,
> [log in to unmask]
> *Most recent Columbia FDI Perspectives*
> <>
>    - No. 324, Charlie Garnjana-Goonchorn, “An Advisory Centre on
>    International Investment Law: Is perfect the enemy of good?,” Columbia FDI
>    Perspectives, February 7, 2022
>    - No. 323, Julien Chaisse, “FDI and sustainable development in the
>    EU-China investment treaty: Neither high nor low, just realistic
>    expectations,” Columbia FDI Perspectives, January 24, 2022
>    - No. 322, Mohammad Saeed, “Implementing an Investment Facilitation
>    Framework for Development: Lessons from the Trade Facilitation Agreement,”
>    Columbia FDI Perspectives, January 10, 2022
> *All previous FDI Perspectives are available at
> <>*
> .
> *Other relevant CCSI news and announcements*
>    -
>    CCSI's 2022 *Executive Training Program on Extractive Industries and
>    Sustainable Development* will take place online from June 6-17, 2022.
>    The program is designed to equip participants with the necessary skills to
>    promote the responsible development of the extractive industries sector in
>    resource-rich developing countries and to encourage a rich dialogue about
>    best practices from around the globe. The two-week training emphasizes the
>    interdisciplinary nature of resource-based development. By working through
>    real case studies and with practitioners and experts in the field,
>    participants will be able to apply analytical tools and frameworks to the
>    unique context of the extractive industries in their country. For more
>    information, and to apply by March 31, 2022, visit our website
>    <>
>    .
>    - CCSI's 2022 *Executive Training Program on Sustainable Investments
>    in Agriculture* will take place online from May 3-13, 2022. The
>    training provides an interdisciplinary approach to addressing the
>    challenges and opportunities of agricultural investments. The program is
>    designed to equip participants with the necessary knowledge and skills to
>    address some of the key challenges posed by international investments in
>    agriculture, and to encourage a rich dialogue about practices from around
>    the globe. Applications will be considered on a rolling basis until March
>    31, 2022. For more information, and to apply, visit our website
>    <>
>    .
>    - *The 2020 edition of The Yearbook on International Investment Law
>    and Policy
>    <>
>    *(edited by CCSI's Lisa Sachs, Lise Johnson, and Jesse Coleman) is now
>    available online
>    <>
>    and in hard copy
>    <>.
>    The 2020 edition includes policy, thematic and regional developments from
>    2020 in investment law and policy, including the impacts of the COVID-19
>    pandemic on investment flows and governance.
> Karl P. Sauvant, Ph.D.
> Resident Senior Fellow
> Columbia Center on Sustainable Investment
> Columbia Law School - Earth Institute
> Ph: (212) 854-0689
> Fax: (212) 854-7946
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> rights reserved.*
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*Karl P. Sauvant, PhD*

*Resident Senior Fellow*
*Columbia Center on Sustainable Investment*
Columbia Law School - The Earth Institute, Columbia University
435 West 116th St., Rm. JGH 825, New York, NY 10027
| p: (212) 854 0689 | cell: (646) 724 5600 e: [log in to unmask]
| w: | t: @CCSI_Columbia

"What foreign investors want: Findings from an investor survey", "Incentivising
Sustainable FDI", "Leveraging Digital FDI for Capacity and
Competitiveness", "Green FDI: Encouraging carbon-neutral investment",
Sustainable Investment to Build Back Better", "Extending International
Legal Aid from Trade to Investment: An Advisory Centre on International
Investment Law", "Increasing Transparency in Investment Facilitation:
Focussed Support is Needed", *Investment Facilitation for Development: A
Toolkit for Policymakers*, "More Attention to Policies! Improving the
Distribution of FDI Benefits. The Need for Policy-oriented Research, Advice
and Advocacy", "More and Better Investment Now!", "Facilitating Sustainable
FDI in a WTO Investment Facilitation Framework: Four Concrete
Proposals", "Multinational
Enterprises and the Global Investment Regime: Toward Balancing Rights and
Responsibilities”, "An Inventory of Concrete Measures to Facilitate the
Flow of Sustainable FDI: What? Why? How?", are available at .

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