ESG RISK 5: Resettlement and Livelihood Impacts

Overview

ESG Risk 5 - Resettlement and Livelihood Impacts addresses risks related to physical and economic displacement caused by hydropower projects. Risk levels are assessed based on the number of displaced households per MW of project capacity, though other factors—like household resilience and availability of alternative livelihoods—can influence risk severity. Physical displacement often leads to economic impacts, especially for land- or river-dependent communities. Extreme risk scores can deter investors, provoke strong community opposition, cause costly delays, and damage the developer’s reputation, underscoring the need for careful, early-stage planning and proactive mitigation strategies.

Additional Guidance

Physical displacement is the relocation, loss of residential land, or loss of shelter as a result of acquisition of land or restrictions on use of or access to land. Potential physical displacement includes anyone who will have to relocate because of the project, either temporarily or permanently. International good practice for mitigation of physical displacement is to ensure that living standards and livelihoods of all affected households are at a minimum maintained during the project's preparation and implementation phases and improved throughout the operation phase.

Number of households is deliberately used rather than number of people. A “household” refers to a family unit, not to a house. Number of households avoids any bias that may be created by referring to the number of people. For example, in one region there may be 50 households of an average size of 6 people per household (total 300 persons), and in another region there may be 100 households of an average size of 3 per household (total 300 persons). A measure of the number of persons would say there are equal risks in the two regions, whereas the risk should be considered higher in the region where the greater number of households are affected.

In many parts of the world, productive replacement land is not readily available, which means the project has the difficult problem of trying to help farmers make the same living from smaller areas of land, or help them move to a non-farm livelihood. This is why resettlement is so often a failure. The practice of shifting cultivation makes it even harder. Hydropower often takes the best land, as people farm in the river valley for a reason. It is imperative that this is clearly recognised and articulated.

Whilst much attention has been paid to resettlement, economic displacement may in fact be much harder to mitigate than physical displacement. Often, a project at the early stage is focused on land acquisition, and will only calculate the costs of likely compensation of land for the early financial analysis. Economic displacement typically affects more people than does physical displacement, as it applies to any persons who will suffer from impacts to their livelihoods due to the project.

Tenant farmers and farm workers are a particularly vulnerable group where land ownership is dominated by large landowners. With an approach that is limited to calculating financial compensation for land acquired, absentee landowners may be the beneficiaries whilst the tenant farmers and farm workers may receive no compensation nor support.

Recognising and addressing impacts to livelihoods due to economic displacement needs greater attention for sustainable hydropower. Economic displacement is defined as the loss of assets, access to assets, income sources, or means of livelihoods. Livelihoods are the capabilities, assets (stores, resources, claims and access) and activities required for a means of living.

Examples of causes of economic displacement include as a result of:

• Acquisition of land;

• Changes in land use or access to land;

• Restrictions on land use or access to land or natural resources;

• Environmental changes leading to health concerns or impacts on livelihoods;

• Disruptions to transport and access routes to livelihood focal areas;

• Crop damage from construction activities such as road dust;

• Fisheries decline due to pollutants, poor water quality and/or hydrological changes.

Freshwater systems and fisheries are critical food sources in many parts of the world, and the impacts of a hydropower project on river-based livelihoods may have high consequences for food security.

Therefore the assessment needs to include those who will lose land but also those in the area who may not be able to continue with their existing livelihoods, temporarily or permanently.

Sources of information that can help inform ratings for ESG Risk 5 - Resettlement and Livelihood Impacts include:

• HSA How-to Guide for Resettlement.

• Topographic map analysis to identify and estimate numbers of people likely to be affected by physical and/or economic displacement. It is important to consider all aspects of the project, including the inundation area, temporary infrastructure sites, transmission lines, roads and other ancillary features.

• Estimates of potential physically displaced people should include those who reside on the land in a seasonal or migratory manner, and those who reside on the land without formal land titles. Important inclusions are those who undertake artisanal mining, and pastoralists with affected dry season grazing and migration routes.

• Estimates of potential economically displaced people should include those who use the land in a share-cropping arrangement. This should also include a focus on river-dependent livelihoods, including river-based transport, and the degree and locations of hydrological change and/or impacts to transport routes in relation to these. Evaluations should consider the food security implications of both land and river impacts to agriculture and/or river-dependent livelihoods.

• Estimation of vulnerability is important when considering displacement. Even a small number of affected people may be highly significant in the case of high vulnerabilities.

• Topographic map analysis and field visits regarding available replacement land of a suitable quality and quantity to replace that which is lost.

In the situation of little to no sources of information relevant to the area of the project option, users of HydroSelect should review Google's mapping services Google Earth and Google Maps that offer satellite imagery and terrain views. These can be closely analysed for signs of housing or commercial activity in the possible future reservoir area, in the catchment surrounding the possible future reservoir area, in the possible future dam and power station site(s) and surroundings, and along the downstream river system.

Opportunities for early stage actions that could reduce the risk for a project option might include:

• Obtaining robust estimates of the numbers of displaced people as early as possible; i.e., do not wait for the Resettlement Action Plan (RAP) surveys;

• Explore alternative locations and designs so the project can avoid or minimise the number of people who will be displaced;

• Discuss with government any process requirements for physical and economic displacement, noting that meeting international standards may require going beyond local compliance requirements;

• Give early consideration to the important timing aspects of physical displacement processes in the context of the overall project development timeline;

• Include early establishment of long-term improvements planning for living standards and livelihoods for all affected communities;

• Plan for timely establishment of the socio-economic baseline for those potentially physically and economically displaced;

• Identify and secure potential resettlement and land replacement locations;

• If replacement land is difficult to secure, be willing to consider a fair market-based value for the land to be lost.

Early engagement allows for better resettlement strategies and planning, which in turn can minimise social disruption, ensure displaced households and communities are compensated fairly, and support integration of displaced households into new areas with adequate infrastructure, services, and livelihoods. Proactively addressing displacement concerns may help build trust with affected communities, which can lead to smoother project implementation, reduced conflict, and stronger stakeholder support. Early displacement planning can help identify and mitigate project environmental and social impacts that are important to community livelihoods. Additionally, by addressing displacement early, projects can better preserve or enhance local economies through skills training, new livelihood opportunities, and job creation for displaced people.