In a nutshell, 'benefit sharing' is the umbrella term for describing the equitable allocation of financial and other advantages arising from major infrastructure projects as between the developer and certain stakeholders (specifically, the local community and indigenous groups) to achieve mutually beneficial outcomes. But this begs the question – can such a concept be summarised so neatly? Who decides what is beneficial to whom? What makes this 'sharing' as opposed to compensation for unavoidable impacts arising from a project?

In this article, we take you through the origin and development of 'benefit sharing' in Australia, and attempt to distil this growing movement into a clearly defined set of principles which are increasingly being viewed as best practice in the major projects space.

What is 'benefit sharing'?

At a very general level, benefit sharing arrangements are those which enable project stakeholders to derive benefits from a project. These arrangements also offer the developer a means to strengthen the social licence associated with a project. Benefit sharing can take on different forms such as provision of project-related employment opportunities, procurement opportunities, co-ownership or equity within the project and community funding.
Benefit sharing is the manifestation of a broader societal trend towards more inclusive project development. It is intended to recognise the importance of involving stakeholders directly into decision-making processes and generally involves the distribution of project benefits or 'co-benefits'. For First Nations groups, benefit sharing mechanisms are often intended to facilitate economic empowerment and reinforce the principles of self-determination. For local communities, benefit sharing schemes are often aimed at redirecting social, environmental and economic benefits from projects back into their community, where their impacts are often most acutely felt.

For project developers, there is a strategic imperative to not only consider but actively integrate effective benefit sharing strategies into projects. The thinking goes that if a project's benefit sharing system or arrangement is effective, social opposition to a project will naturally dissipate. It can also assist by acting as an effective tool in combatting approval challenges. In turn, projects that garner substantial community and First Nations support are less likely to encounter costly delays and opposition, thereby safeguarding project timelines and budgets. Moreover, a strong social licence to operate minimises the risk of social backlash and protects against reputational harm. Investors are increasingly drawn to projects that demonstrate a commitment to community enhancement and align with broader social values.

Global trends of benefit sharing

There is a growing global movement towards equitably distributing the benefits derived from energy transition and mining projects with Indigenous groups and local communities. This shift towards more inclusive and sustainable project development practices reflects an understanding that meaningful stakeholder engagement and participation is increasingly being viewed as integral to long-term success for major projects.

For example, in Denmark it is legally mandated that all new wind projects offer at least 20% of shares to local residents to enhance local community investment opportunities. Upon receiving development consent from the local municipality, the project developer must conduct a public meeting to present the opportunity for the local community to purchase shares in the project. To further motivate individual share ownership, tax incentives are provided, with dividends being tax-free up to an amount equal to average annual electricity bills. An illustration of the Danish model is the Middelgrunden Wind Farm, which has a 50% stake held collectively by almost 10,000 community members and the other half by Copenhagen's municipal utility company. This approach can allow local residents to have a real stake in the project, fostering a sense of ownership and aligning local interests with the success of the project.

In Canada, benefit sharing arrangements are in place for approximately 20% of energy projects, ensuring Canada’s Indigenous communities derive benefits under the Federal National Benefit Sharing Framework. The Haeckel Hill-Thay T’äw Wind initiative in Yukon, developed by Eagle Hill Energy LP, stands as the most significant example, being the first project to be 100% Indigenous owned wind energy project in the region. The project commenced operations in early 2024. Whilst operated by Eagle Hill Energy LP, the project is owned by the Chu Níikwän Limited Partnership which forms part of the Kwanlin Dün First Nation group. Over the next two decades, this project is anticipated to produce sufficient electricity to supply up to 650 households. The project supports local and Indigenous sovereignty and energy security whilst also supporting local jobs and skill capacity, representing an important step for reconciliation. Although not falling within the typical framework of benefit sharing, the significance of the Haeckel Hill wind project demonstrates the potential trajectory for energy projects which place significant importance and advocate for the voices of First Nations groups. However, this model may not be suitable for larger, more traditional and capital intensive mining and energy projects, which require significant investment.

New Zealand provides another model with the Tuaropaki Geothermal Power Station, where the Maori Tuaropaki Trust holds a majority share (75%) and the project developer, Mercury Energy, holds the remaining 25%.

Across the globe, we have seen a push to develop benefit sharing arrangements with Indigenous communities as a particular stakeholder. These arrangements are typically tailored to acknowledge and respect the unique cultural, social, and economic circumstances of Indigenous communities. In this context, benefit sharing mechanisms should recognise the intrinsic connection between Indigenous peoples and their traditional lands. By incorporating benefit-sharing arrangements with relevant Indigenous communities within project development, developers can facilitate genuine partnerships and ensure that Indigenous communities receive tangible benefits. These can include employment opportunities, support for local businesses, cultural heritage protection, co-ownership and direct financial investments. In turn, these efforts may not only contribute to improving a project's social licence to operate, but may also result in internal improvements resulting from the unique insights and knowledge Indigenous peoples can offer.

Australian trends of benefit sharing

Although in Australia we are yet to see legally mandated requirements for benefit sharing, in recent years there has been a clear uptake towards the adoption of benefit sharing mechanisms and more specifically, First Nations benefit sharing models.

For example, in July 2021 the Victorian Government updated the ‘Community Engagement and Benefit Sharing in Renewable Energy Development in Victoria’ guide for renewable energy developers (Victorian Guide). This document signalled the Victorian Government’s expectation that benefit sharing initiatives are to become an integral part of renewable energy projects in the state. Under the Victorian Guide, the Victorian Government outlined its desire for projects to generate mutually beneficial outcomes for First Nations groups, aligning with the ‘Pupangarli Marnmarnepu, Owning Our Future’ strategy for Aboriginal self-determination. The Victorian Guide outlines various benefit sharing mechanisms that can be implemented to reap tangible benefits for community stakeholders and Indigenous groups such as community funds, local investment opportunities, and employment and training opportunities. The document also provides relevant case studies and practical guidelines on how to design effective benefit sharing strategies.

More recently in April 2024 at the Yoorrook Justice Commission the Victorian Energy and Resources Minister Lily D'Ambrosio (current Minister for Climate Action, Minister for Energy and Resources and Minister for the State Electricity Commission) stated that it was her intention to ‘embed within a critical mineral strategy in consultation with traditional owner communities, a concept of community benefit-sharing and traditional owner benefit-sharing... a properly formally recognised set of rules around what meaningful engagement means… from a forward looking strategy for self-determination purposes. This is about shifting power and resources ultimately to traditional owners.' Similarly, in May 2024 the Victorian Government released its Draft Renewable Energy Zone Community Benefits Plan, a framework designed to deliver direct benefits to communities that will host new transmission and renewable energy infrastructure.

Furthermore, benefit sharing (specifically in relation to First Nations engagement) is one of the four key themes under the Victorian Government's first Critical Minerals Roadmap released in late 2024, under which benefit sharing is identified as an integral feature of the Victorian critical minerals industry to encourage positive and equitable social, environmental and economic outcomes as between different stakeholders.

The Federal Government's Critical Mineral Strategy 2023-2030 (CMS) emphasises that benefits gained from the growth of Australia's critical minerals sector need to be shared with and driven by the local First Nations communities. The CMS also highlights that benefit sharing in the industry, including stronger engagement practices and partnerships with First Nations communities, will strengthen the sector's sustainability and its current and future social licence to operate, and benefit Australia's global ability to leverage its ESG credentials.

In the context of government contracting schemes (for example, the Victorian Renewable Energy Target and the Federal Capacity Investment Scheme (CIS)) there is a clear expectation that project developers will incorporate benefit sharing proposals as part of the tendering process for government funding. This focus is evident in the criteria set out for CIS Tender 1 – National Electricity Market Generation. The CIS, an initiative by the Australian Government, is designed to fast-track investments in renewable energy projects, involving competitive bidding processes for underwriting agreements aimed at achieving a target of 32 gigawatts of capacity by 2030. Within the CIS Tender 1 framework, several Merit Criteria were set, including First Nations and community engagement (Merit Criteria 4) and First Nations and social licence commitments (Merit Criteria 7). Projects that score low in these criteria are at risk of not progressing to further assessment stages. To satisfy Merit Criteria 4 and 7, proponents can reference benefit schemes for community stakeholders, First Nations or neighbours and various related initiatives such as employment for local workers, First Nations employment quotas, investment in education and training, and conducting cultural value assessments beyond what is legally required.

Similarly, eligibility criteria for the Victorian Government’s second Victorian Renewable Energy Target (VRET2) underscores expectations for community engagement and benefit sharing as part of the development of renewable energy projects. The Victorian Guide was a key part of VRET2's eligibility and evaluation criteria, setting out the Government's expectations for community engagement and benefit sharing for renewable energy development in Victoria.

Taken altogether, these initiatives and efforts signal a clear political and regulatory shift, influencing stakeholder expectations towards the integration of benefit sharing and specifically benefit sharing models for First Nations and local communities into project development.

So what does benefit sharing actually look like?

The NSW Department of Planning, Housing and Infrastructure's 'Benefit Sharing Guideline' released in November 2024 provides that effective benefit sharing schemes should follow six key principles:

1. Benefit sharing as a standard practice: Incorporation of benefit sharing should be routine.
2. Collaborative benefit sharing: Benefit sharing initiatives ought to be co-created with relevant stakeholders.
3. Transparent benefit sharing: Details of benefit sharing agreements should be accessible to the public, including regarding the management and allocation of funds.
4. Community-focused benefit sharing: Benefit sharing arrangements must be tailored to local needs and resonate with community priorities. Developers should seek to cultivate trust and build robust relationships with stakeholders and work to maintain direct and open communication with all stakeholders to foster transparency and trust.
5. Proportionate benefit sharing: The benefits provided to stakeholders should correspond to the project's size and the degree of likely impacts upon stakeholders.
6. Positive outcomes through benefit sharing: Benefit sharing should achieve significant and long-standing benefits, including improved social, environmental and economic outcomes.

As illustrated through the broadness of these principles, there is clearly no ‘one size fits all approach’ as to what effective benefit sharing should look like in any particular case. What will drive this in each circumstance will be the stakeholders' needs and concerns. Furthermore, as identified by the Victorian Critical Minerals Roadmap, it is likely that project developers will need to develop two different benefit sharing models, one for community and one for traditional owner groups, to ensure the views and concerns of each are adequately addressed and prioritised.

Benefit sharing models

Below, we describe some examples of benefit sharing models which are being explored across the globe, as well as examples which are being rolled out at home in Australia.

Co-ownership and co-investment

Globally, co-ownership and co-investment are two more innovative models of benefit sharing that have emerged, offering significant and direct advantages to community stakeholders. Community co-ownership and co-investment models stand out for their ability to afford communities direct financial benefits and a voice in decision-making.

Below, we explore these two approaches which, while gaining momentum in Australia, have not yet become mainstream within mining and energy industries. Despite their slow uptake as compared to global counterparts, these two models are indicators of the potential future direction for benefit sharing in mining and energy projects in Australia. Broadly, these involve:

1. Co-Ownership: under this model, community stakeholders will own a stake in the project, granting them both a share of the profits and a say in investment and key project decisions. While this approach exposes community stakeholders to risks, it offers them greater control and the chance to directly shape positive community initiatives, such as engagement activities and fund distribution. This model is often structured as a joint venture between community stakeholders and developers.
2. Co-Investment: a collaborative financial model where community members can directly contribute to renewable energy projects through a community investment vehicle. The investment could be in the form of debt, royalty rights or equity. This vehicle allows community members to financially benefit from a project, without having any control or autonomy over operational decisions. Investments might take various forms, such as providing loans, purchasing royalty rights, or acquiring equity stakes. The community investment vehicle could be a company, cooperative, association or trust.

Whilst the foundational principles or frameworks underpinning these two models are similar, they are different in the level of control or influence that stakeholders have over a project, and must be carefully scoped to address the individual needs to the intended recipients. They also need to be structured in a way that enables access. A lack of financial capital is often a key barrier for communities and First Nations stakeholders to be able to participate in these arrangements. A development bank, or other dedicated financial mechanism, can be used to overcome this barrier.

Whilst more commonly thought of as a model for community benefit sharing, co-ownership has garnered popularity as a model for First Nations benefit sharing, used as a tool to provide meaningful financial benefits to First Nations groups whilst ensuring First Nations have a voice in key project decisions. An example is the East Kimberly Clean Energy Project, which provides a unique benefit sharing scheme in Australia's North-West region involving co-ownership. This proposed $3 billion green energy, hydrogen and ammonia export project is a partnership between climate change investment firm Pollination and local First Nations groups. MG Corporation, representing the Miriuwung and Gajerrong people, Balanggarra Aboriginal Corporation, the Kimberley Land Council and Pollination will each own one-quarter of the project. This new model positions First Nations as shareholders, not just stakeholders. The partnership provides a model for infrastructure projects in Australia that will ensure First Nations benefit from the scale and pace of the transition to renewable energy.

Co-ownership is being used for broader community benefit sharing arrangements. An example is the Hepburn Wind Community Co-operative in Victoria, which is Australia’s first community-owned wind farm. Whilst this is a relatively small-scale project, generating clean energy for over 2,000 homes, this pioneering project which first commenced operations in 2011, demonstrates the breadth of project development models being adopted in Australia. The Hepburn Wind project secured $10 million in funding through investments from the community, which included 2,000 retail investors both local and non-local, complemented by grants from the state government and a bank loan provided by Bendigo Bank.

Co-investment is a form of benefit sharing particularly suited to community involvement, as it allows for the participation of large groups of individuals to contribute financially to the project. An example of community co-investment is the Sapphire Wind Farm in New South Wales, which is operated under a joint venture between Squadron Energy and the Grassroots Renewable Energy Trust, co-developed with the community and received $7.5 million in local community investment. The Sapphire Wind Farm provides a $3.75 million community benefit fund, to be invested over 20 years, intended to support community initiatives.

Other benefit sharing models

Project developers can (in addition or alternatively to co-ownership and co-investment models) implement programs and initiatives to further support community and Indigenous stakeholders, such as direct payments to stakeholders within specified distances from the project, the allocation of employment opportunities for community members, vocational training opportunities, preferential procurement, environmental stewardship, environmental research, habitat protection and restoration funding, and the provision of funds to local charities and organisations. The specific details of these arrangements and the selection of which of the above initiatives to adopt will ultimately depend on the needs and concerns of the community or First Nations recipients, so as to ensure the benefit sharing is relevant, effective and supports the long-term well-being and interests of those impacted by the projects.

For First Nations benefit sharing models, initiatives which provide employment opportunities, promote environmental stewardship and provide compensation payments to have proven effective.

A key Victorian example of First Nations benefit sharing is by Canadian company, Agnico Eagle Mines, who entered into an agreement in 2024 with First Nations group Djaara to compensate First Nations people from the Dja Dja Wurrung area for the gold mine at the Fosterville Gold Mine. An initial payment was provided to the Dja Dja Wurrung People in recognition of their connection to the mined land and the project will also allocate a portion of revenue annually to the First Nations group. As part of the agreement, employment and training opportunities are also provided to First Nations and the Dja Dja Warrung People are granted a voice and active participation in environmental monitoring. A committee comprising of representatives from both the mining company and First Nations will be established, to oversee the implementation of the agreement and the project more broadly. This agreement is similar in nature to agreements that Agnico has made with First Nations groups in Ontario, Canada, and gives the Djaara people a level of influence over the gold mine's operations and environmental impacts. When the mine has reached its projected life span in 2033, the Djaara people will also have input into the rehabilitation works.

In relation to community benefit sharing, implementation of initiatives such as employment opportunities for community, investment in community infrastructure and allocating funds to local charities and community organisations are also increasingly common in community benefit sharing models.

An example is the Moree Solar Farm in New South Wales, operated by Fotowatio Renewable Ventures. As part of the solar farm, over 75% of construction jobs were awarded to local workers and permanent local employees continue operate the solar farm. A portion of project revenue is directed back into the local community of Moree, via grants to local initiatives such as sporting or educational organisations within the Moree Plains, allocated from the project's Community Enhancement Fund.

For community landowners, benefit sharing can take on a simpler form of monetary payments in recognition or acknowledgment of the fact that a proposed project would (notwithstanding the generation of any broader societal benefits) change the general amenity of an area. Such payments can be scaled depending on the proximity of a particular landowner stakeholder to a project boundary. Monetary payments to community landowners are more common for energy transition projects, however, we have recently seen an increase in the uptake of this model in the mining context. VHM Ltd, as part of the development of the Goschen Rare Earth and Mineral Sands project, offered payments to 14 landowners situated within a 3.5-kilometre radius of the project, recognising the likely change in local amenity due to the project. This benefit sharing agreement aims to extend financial benefits to neighbours who were not compensated through land acquisition or access agreements. VHM Ltd adopted a tiered payment system, allocating annual payments based on proximity to the project site, commencing once construction starts and continuing throughout the mine's operations. The compensation is set at $25,000 for homes within 1 kilometre, $10,000 for those 1 to 2 kilometres away, and $5,000 for residences between 2 and 3.5 kilometres from the project. Landowners have the opportunity to opt into the agreement at any stage during the project's life, although payments will not be backdated. As far as we are aware, this is the first time such an approach has been adopted for a mining project in Victoria.

Collective benefit sharing

Collective benefit sharing is another trend that is gaining momentum. This approach allows for a larger pool of resources to be gathered across different projects, providing more substantial benefits to stakeholders.

One form of collective benefit sharing involves projects within a particular geographic area contributing to a regional fund, which then distributes resources to local stakeholders. For instance, the 2024 Victorian draft Renewable Energy Zone (REZ) Community Benefits Plan (Draft Plan) outlines the creation of REZ Community Energy Funds for each REZ established within Victoria. All new renewable energy and transmission projects within a REZ zone will be required to make contributions to these funds. The funds are accessible to community groups for initiatives aimed at enhancing power supply, reducing energy costs and fostering employment opportunities within the energy sector. Such initiatives may include the development of community microgrids, network upgrades or collective purchases of solar panels or heat pumps. The Draft Plan proposes that transmission companies will contribute $8,000 per kilometre annually for 25 years for new transmission easements created within and outside the REZs to their respective REZ Community Energy Fund.

In relation to mining projects, whilst not stipulated under the 2024 Victorian Critical Minerals Roadmap, a collective benefit sharing fund may also be established within proposed Critical Minerals Priority Development Zones (CMZ) across Victoria.

Collective benefit sharing arrangements can attract greater funding by pooling resources from multiple projects. However, institutionalising these arrangements may inadvertently diminish the capacity for direct, meaningful engagement with First Nations and local communities. The 'one size fits all' approach of collective benefit sharing removes the opportunity for developers to craft a direct, unique, positive narrative tailored to the specific project's requirements, and to engage with stakeholders on matters they are particularly interested in engaging on. This loss of direct engagement in favour of a more institutionalised approach carries a risk of undermining the project-specific social licence that it seeks to facilitate.

Project developers who seek to develop individualised benefit sharing models in addition to geographic collective benefit sharing funds for REZs or CMZs will need to be aware of the potential for overlaps and manage these to ensure that benefits are distributed effectively and equitably across both models.

Is industry best placed to deliver on the promise of benefit sharing?

Notwithstanding all of the above, a critical question remains – are project developers well positioned to implement benefit sharing models effectively and sensitively?

As discussed above, benefit sharing demands more than a one-size-fits-all approach, it requires a granular understanding of community perspectives and an in-depth appreciation of the cultures and languages of the relevant stakeholder groups. To effectively deliver on the promise of benefit sharing, project developers are expected to have the necessary expertise and cultural competencies to meaningfully engage with local communities. Developers must be skilled at not only identifying these pressure points but truly comprehending nuanced and diverse views and concerns, and then adeptly integrate this understanding into project planning and execution, whilst balancing commercial imperatives. While government guidance on benefit sharing is increasing, policy directions alone are insufficient. They do not always provide certainty to equip developers with the practical tools required to implement effective and culturally sensitive benefit sharing models. Accordingly, there is a need for clear policy direction and significant upskilling for corporate entities in areas such as cultural competency and community engagement to ensure benefit sharing is an effective tool.

The assumption of consensus and its pitfalls

Another critical issue to grapple with is the flawed assumption that all stakeholders, with an effective benefit sharing model, will support a project. While benefit sharing arrangements may assist with broader social licence, they certainly won't deliver it by themselves, particularly where they are not viewed as authentic and there is no opportunity for genuine stakeholder input into what they involve.

Developers and industry can navigate these challenges by engaging with community in the early stages of projects on potential benefit sharing arrangements, to garner community input, build trust and foster genuine relationships from the outset. This proactive approach to developing benefit sharing arrangements can mitigate opposition by demonstrating respect for the community's needs and perspectives whilst also learning about the unique interests of the community, which is crucial for tailoring benefit sharing arrangements in the future.

The need for upskilling and capacity building

In addition to the need for project developers to enhance their ability to meaningfully engage with community stakeholders, capacity building is also required for community stakeholders and First Nations groups to overcome mistrust and ensure stakeholders derive meaningful benefits. Upskilling could encompass financial literacy training to manage funds prudently, environmental management education, and practical trainings to encourage participation in negotiations and actively engage in decision-making processes. With these skills, communities can be better positioned to make well-informed decisions. While developers clearly have a part to play in this, there is clearly a role for Government also.

Conclusion

Benefit sharing is increasingly becoming a cornerstone of project success, offering a mechanism to align developers' commercial interests with community values, respect for First Nations, and environmental and social expectations. Victoria's recent policy developments signal an emerging consensus in favour of integrating benefit sharing frameworks within mining and energy transition initiatives across the state. The effectiveness of benefit sharing models ultimately depends on the ability of developers to cultivate meaningful, transparent and authentic engagement and dialogue with stakeholders. This article provides an overview of the key principles of benefit sharing and provides examples of current and emerging practices, to assist developers to navigate this shifting terrain and confidently approach benefit sharing as an opportunity for best practice within mining and energy transition sectors.

Please reach to discuss how we can assist your organisation with implementing an appropriate benefit sharing model and strategy for your mining or energy transition project.