HOW CAN RESPONSIBLE INVESTORSMITIGATE THE RISK OF THEIRINVESTMENT IN THE MINING SECTOR?
It is very important that investors engage on
in mining projects in developingcountries. A double check should always be done alsoat country level: if the Government is not transparenthigh risks of corruption in the market are to beexpected.A relevant engagement initiative by responsibleinvestors has been the support of the
initiative.Over 80 investment institutions, which collectivelymanage over US$ 16 trillion of assets, have signed
the Investor Statement on Transparency in theExtractive Sector
. Institutional investors withexposure to extractives companies have an interest in
Section 1504 mandates oil, gas and mining companies, registeredwith the Securities and Exchange Commission (SEC), to publiclydisclose the tax and revenue payments made to any government;Section 1502 requires that companies using minerals from theDemocratic Republic of Congo provide disclosure that thepayments did not fund armed groups in that conflict country, oradjoining countries, under what conditions those minerals weremined, and measures taken to exercise due diligence on thesources of minerals and their chain of custody.
encouraging the implementation of the EITI as a meanto contribute to improvements in governance andtransparency.Also the high social and environmental risks of landgrabbing in the mining sector particularly in developingcountries are to be carefully considered by investors.The major obstacle is to guarantee communities the
Free Prior and Informed Consent
(FPIC) whichmeans aligning the interests of the shareholders andthe stakeholders (specifically the affectedcommunities). This is a necessary condition forextractive projects to be successful in contributing tosustainable development.Since 2006
members, among which CBIS,Calvert, Wespath, etc. managing several billion ofUS$ in assets have been engaging in dialogue withNewmont Mining and filing resolution on theintroduction of the FPIC, with the goal of preventingsome severe reputational and operational risks of theirinvestment. These dialogues are meant to improve thesustainability, transparency and accountability ofinvestments in mining to which the investors commit,inviting also other investors to follow their lead.
THE CASE OF NEWMONT MININGECPI ESG RATING
Since 2007 ECPI has rated
(F) because of serious environmental andsocial concerns.In the last decade community protests occurred in theNewmont Mining sites in Indonesia, Ghana and Perubecause of severe environmental pollutions caused bythe mine tailings and waste disposal contaminatingcommunity water sources and as well as poor healthand safety labor conditions.These severe impacts have prompted violent
communities’ demonstrations and complain
againstland grabbing and poor compensation for thedamages caused by the mine operations.In the recent 2012 review of the US mining company,ECPI confirmed the rating F for its still relevant highsocial and governance concerns, but with an higherscore because of improved standards inenvironmental management.According to ECPI Environmental analysis thecompany has a fair environmental performance. It hasa wide and ambitious environmental strategy.
ICCR includes 275 faith-based institutional investors, includingnational denominations, religious communities, pension funds,foundations, hospital corporations, economic development funds,asset management companies, colleges, and unions. Each yearICCR-member religious institutional investors sponsor over 200shareholder resolutions on major social and environmental issues.ECPI has been a member of ICCR since 2002.