Pricing lost consent into the capital plan

Most capital models for a large energy or infrastructure project carry a precise figure for steel, a precise figure for financing, and a blank where the cost of losing a community should be. The social risk is not absent from the project. It is absent from the model. It is handled somewhere else, by a different team, under a different heading, and it is almost always priced at zero until the day it stops the work.

That is a modelling error, not a values statement. The evidence that community conflict carries a hard, quantifiable cost has been in the open for over a decade, and the people who pay it are the sponsors and the lenders, not only the affected villages.

The cost is delay, not the protest

The most rigorous work on this remains Rachel Davis and Daniel Franks’ study for the Corporate Social Responsibility Initiative at Harvard’s Kennedy School, published in 2014 and drawn from 45 confidential interviews with industry, an analysis of 50 public cases, and fieldwork in Peru. Its central finding is the one boards tend to miss. The most frequent cost of company-community conflict was not litigation or property damage. It was lost production. And the most damaging cost was not any single event but the opportunity cost of projects that could no longer proceed, expand, or be sold.

Read that back into a capital model and the point becomes concrete. A project’s economics are dominated by time. Every month a multi-billion-dollar asset sits idle past first oil or first power is a month of financing carried against no revenue, and the net present value of that lost time is enormous. Conflict rarely destroys a project outright. It delays it, repeatedly, in ways that look minor in isolation and compound into the single largest overrun on the sheet. The protest that makes the news is the visible tip. The cost is the schedule underneath it.

Two projects that show the mechanism

Mozambique LNG is the clearest recent illustration that security and social risk are the same balance-sheet item. TotalEnergies declared force majeure on the roughly twenty-billion-dollar project in April 2021, after an insurgent assault on the town of Palma in March 2021, about ten kilometres from the site. The pause ran for roughly four and a half years; force majeure was not lifted until October 2025. Public reporting puts the additional cost of that suspension at around four and a half billion dollars, before counting the years of deferred revenue. The insurgency in Cabo Delgado has many causes, but a project economics review that had treated the surrounding social and security environment as a fixed backdrop rather than a live variable would have carried none of that exposure until it arrived all at once.

The East African Crude Oil Pipeline shows the slower version of the same dynamic. By EACOP’s own figures more than 13,600 people were affected by the pipeline route, with the company reporting that the overwhelming majority of compensation agreements were signed and paid. Yet Human Rights Watch, reporting in 2023, documented multi-year delays in paying compensation and levels that recipients considered inadequate, and described livelihoods disrupted for households that lost land before they were made whole. The gap between “compensation was paid” and “the community considers the deal fair” is precisely where opposition, litigation, financing difficulty, and delay live. A project can be fully compliant on paper and still be accumulating the very schedule risk its model ignored.

Nigeria’s own record supplies the same evidence at scale, in the form of decades of Niger Delta disruption whose costs, in deferred production and abandoned expansion, dwarf the cost of the engagement that might have prevented them. The pattern does not change with geography. What changes is whether anyone put a number on it before the work began.

Why the number stays invisible

Social risk is priced at zero for structural reasons, not because anyone decides it is worthless.

It sits with the wrong function. Community relations usually reports through corporate affairs or sustainability, not through the project finance or risk team that builds the model. The people who could quantify the exposure never see it, and the people who see it cannot quantify it in the language of the capital committee.

It is hard to measure, so it is treated as unmeasurable. A delay caused by a court injunction is legible; a delay caused by eroded trust that slows every permit, every land access, and every local hire is diffuse, and diffuse costs are easy to leave out of a model that prefers clean line items.

And it is politically inconvenient to name. Putting a credible number on the cost of losing consent is, implicitly, an admission that the project could lose it. It is easier for a sponsor to assert that community relations are “well managed” than to model what happens if they are not. The result is a plan that is precise about concrete and vague about the thing most likely to stop the concrete being poured.

Putting consent in the capital plan

The fix is not more goodwill. It is to treat social risk as a scheduled, costed, owned risk on the same register as geotechnical or currency risk, and to do a few specific things.

Give it a line in the model. Even a rough, defensible estimate of the delay associated with a contested land take or a weak consent process is better than a blank, because a blank reads as zero and zero is always wrong. The estimate can be a range. What matters is that the capital committee sees an expected cost of getting engagement wrong, expressed in the currency it actually uses, which is time and money.

Move the spend forward. The cheapest point to buy consent is before ground is broken, when engagement, fair compensation, and grievance mechanisms are a rounding error against the capital budget. The most expensive point is after a stoppage, when the same outcomes have to be bought under duress, at a premium, with trust already spent. Front-loaded social investment is not generosity. It is buying schedule certainty at the lowest available price.

Build a grievance mechanism that actually resolves things. Most conflicts that stop projects began as small, specific complaints that had nowhere to go and hardened into opposition. A functioning grievance channel, with real authority to fix problems and a track record people can see, is one of the highest-return risk controls on a large project, and it almost never appears in the risk budget.

Diligence the consent, not just the permit. Lenders and sponsors interrogate the environmental permit and the title. They should interrogate the quality of consent with the same rigour: who was consulted, whether compensation was fair and timely, whether the grievance process works, and whether the people living beside the asset would describe the deal as legitimate. That last question is the leading indicator. The permit is the lagging one.

The test

There is one honest question a sponsor can ask to see where it stands. If the community relations budget were cut in half, would anyone on the capital committee be able to say what that does to the schedule? If the answer is no, the project is not managing social risk. It is hoping, and it has priced that hope at zero.

Consent is not a soft matter that sits beside the project. It is a hard input to the project’s cost of capital, and it behaves like every other risk that is ignored until it is expensive: quiet, then sudden. The work that moves it from the press office to the capital plan is unglamorous, and it is the work that decides whether the model the board approved bears any resemblance to the project it eventually gets.

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Sources: Davis & Franks, Costs of Company-Community Conflict in the Extractive Sector (Harvard Kennedy School, 2014) · Franks et al., Conflict translates environmental and social risk into business costs (PNAS, 2014) · TotalEnergies: Mozambique LNG force majeure · TotalEnergies lifts force majeure on Mozambique LNG · Human Rights Watch, Uganda: Oil Pipeline Project Impoverishes Thousands (2023)

This article is general guidance, not legal or investment advice.