The Due Diligence Blind Spot Costing Investors Millions

Technical assessments come back clean. Financial models are validated by three independent firms. Every permit is in place, every off-take agreement reviewed and deemed bankable. And yet the project still stalls — not because the engineering was wrong, but because of a risk nobody's due diligence process was built to find.

The pattern

Across emerging and frontier markets, we repeatedly see well-structured project financings run into resistance from stakeholders who were never on the due diligence radar in the first place. The technical work was flawless. The financial structuring was sophisticated. The project still stalled, costs escalated, and timelines collapsed — because of a risk that never appeared in any report.

Traditional due diligence for project finance follows a well-worn path: technical assessment by leading consultants, financial models stress-tested against every sensitivity, legal review of permits and land rights, an ESIA covering environmental and social impact. It can run to thousands of pages and take over a year to complete. Every conventional risk gets identified, quantified and mitigated.

Yet across renewable energy, mining and infrastructure, we keep seeing projects hit obstacles that this exhaustive process somehow missed entirely.

The missing risk: social license to operate

The blind spot has a name in development circles — "social license to operate" — and it doesn't show up in permit registries or legal databases. It lives in community relationships, local political dynamics and informal power structures that no formal process is designed to capture.

A wind or solar development with excellent resource data can still face opposition from a fishing community worried about offshore cables, or a pastoralist group concerned about grazing land — groups that were never classified as "affected parties" in the formal ESIA, but that have the practical power to block site access. A toll road backed by solid traffic studies and government guarantees can be undermined by a competing free route that emerges from local political rivalry rather than any government plan. A mine with a signed community development agreement can face renewed opposition once the traditional leaders who signed it no longer represent community sentiment, especially among a younger generation with different priorities.

The common thread: traditional due diligence is built to verify formal documentation. In many of the markets we work in, informal power matters more than formal power. If a risk isn't written down somewhere, it usually doesn't make it into the risk matrix.

Why sophisticated teams still miss it

This isn't a competence problem — the teams doing this work are highly skilled. It's a structural one, and it comes down to three design flaws in how project finance due diligence is typically run.

Formalisation bias. Due diligence is built around verifying what's written down — permits, contracts, registered titles. Informal power, who actually influences a decision on the ground, isn't documented, so it's systematically underweighted.

Specialist silos. Technical, legal and environmental advisors each go deep in their own domain. Political economy risk — who really has power, how decisions actually get made — falls between those silos. Everyone assumes someone else is covering it. Often no one is.

Historical data dependency. Financial models lean on comparable transactions and past precedent. In fast-moving markets, last year's stable political environment is this year's regulatory uncertainty, and yesterday's community support is today's opposition movement.

A different approach

We complement the standard technical, financial and legal workstreams with what we call political economy due diligence — systematically mapping the informal structures, stakeholder dynamics and adaptive risks that conventional processes leave out.

That means identifying who actually influences outcomes on the ground, not just who holds formal authority. It means running political economy scenarios alongside the usual sensitivity analysis — what happens if the opposition wins the next election, or a new discovery shifts local economic incentives. It means talking to local journalists and business owners who understand the informal rules long before they show up in a stakeholder register. And it means designing deals for adaptation, not just mitigation — contract flexibility, staged commitments, alternative siting — so that when a social license issue emerges, the structure can bend instead of break.

The most valuable due diligence question isn't "what could go wrong with this project?" It's "who has the power to stop this project, and what are their incentives?"

If your due diligence process can't answer that question with confidence, the technical and financial analysis behind it — however sophisticated — may be standing on unstable ground. This doesn't mean abandoning the traditional disciplines; they remain essential. It means recognising their limits, and supplementing them with an approach built to find the risks that formal processes are structurally blind to.