Introduction: Sweden will now consider aligning their social and environmental values in their public pension investments. The connection between investment and civil society values seems basic enough, yet such an action would be a significant milestone.
Swedwatch’s recommendation is radical:
“The present regulatory framework limits the funds’ ethical and environmental consideration as it states that it may not impact the financial return negatively. Swedwatch recommends that this limitation is removed and that the funds in severe cases are allowed to prioritize ethics.”
There’s no question that socially responsible funds are looking to invest in gold. Gold has been one of the best investments of the past five years. I personally have been contacted by a socially responsible fund for advice, but there is no mining company I could
recommend. However, new ethical mining projects are being developed that do need seed money and hopefully they will come on line soon.
In the meantime, only a person or fund with an unhealthy degree of ignorance or psychopathy would invest in companies that destroy communities and our environment. The same may be said for jewellers who purchase gold that is not traceable to source. The “usual suspects,” mentioned in this study, Newmont, Barrick and Goldcorp, all major suppliers of gold the jewellery sector, are sited for their environmental and human rights violations.
Thanks to Jakob Konig at Swedwatch for permission to print the summary of their study. Marc Choyt, FJA USA.
The Swedish National Pension Funds (AP-funds) is a publicly-operated pension scheme, which invests in listed companies worldwide and has assets worth more than EUR 100 billion. Through the AP-funds’ holdings in thousands of multinational companies, Swedish pensions
are connected to a number of social and environmental problems such as violations of human rights, environmental destruction and corruption. Environmental and civil rights organisations have repeatedly criticized the AP-funds, arguing that investing in such companies conflicts with Swedish public policies and goals regarding global and sustainable development.
In this report, Swedwatch has investigated the AP-funds’ investment in three multinational mining companies and their gold mines in Peru, Guatemala and Chile. This report was commissioned by The Solidarity Sweden-Latin America (SAL).
The AP-funds’ Social and Environmental Considerations
In year 2000 the AP-funds were instructed by the Swedish Government to consider social and environmental issues related to their investments. The AP-funds have therefore required that companies they invest in must comply with international norms which the Swedish Government supports. Four of the AP-funds coordinate the work through a common council, the Ethical Council. The Ethical Council engages with around 15 companies which are involved in severe violations of international norms and conventions. The Council’s goal is to convince the company to act responsibly and implement systems to prevent future violations.
Swedwatch has investigated three mining companies in which the AP-funds hold shares: US-based Newmont Mining Corporation and Canadian-based Barrick Gold and Goldcorp. All three companies have been accused of violating of human rights and severe environmental impact in connection with their gold mines in Latin America. The AP-funds have in total EUR 150 million invested in the companies but have only reacted to one of the cases.
Newmont – Polluted Water, Violence and Poor Transparency
|(Máxima Acuna shows bruises that she got the day in August 2011 when her family was brutally evicted from their home by Yanacocha’s security guards.)|
The first company discussed in this report is Newmont and its operations at the Yanacocha mine in Peru. In August 2011 Swedwatch conducted a field study at the mine and were able to conclude severe social and environmental problems, which appeared to be caused by the mining activity. Water shortage and polluted water around the mine, land conflicts with local farmers, harassed union representatives – these were findings that was confirmed by Spanish scientists and local representatives. There are strong indications that Yanacocha breeches the ILO 169 Indigenous Peoples Convention. The study also found indications of violent abuse of the local population. Swedwatch’s researcher was not allowed to visit the mine nor speak with representatives from the company. The problems around the mine have existed for a long time and several civil rights organisations and international media have reported on the issue. This is the first time it is being raised in Sweden.
Barrick Gold – Melting Glaciers and Human Rights Violations
The second company in the report is Barrick Gold and the Pascua-Lama mining project on the border between Chile and Argentina. The project is under development and the extraction
has not yet started but the project has already lead to glaciers melting nearby.
Continued work could lead to severe damages to the environment and water pollution. The project has possibly violated the rights of the indigenous people, Diaguitas. A complaint is filed and under investigation by the Inter-American Commission on Human Rights (IACHR). Barrick Gold has previously been criticized regarding its mining activities, for example regarding human rights violations at their Porgera mine in Papua New-Guinea and at the North Mara mine in Tanzania. The Pascua-Lama project is an example of a case where the AP-funds have the opportunity to exert a positive influence at a relatively early stage.
Goldcorp – The Problems Continue, The Dialogue Also
The third company in the report is Goldcorp and the Marlin mine in Guatemala. The AP-funds have several times defended its ownership in Goldcorp by pointing to its ongoing constructive dialogue with the company. But the problems continue, including rights violations of indigenous people, water problems, disputes about land, abuses and harassment of the local population. The case demonstrates the need for clearer guidelines regarding the funds’ engagement with companies and how difficult it is to evaluate the funds’ efforts due to the limited reporting.
Criticism Against The Funds
Environmental and civil rights organisations have repeatedly criticized the AP-funds for failing to consider environmental and social issues. The funds use only a tiny fraction(1) of their budgets for monitoring environmental and social issues.
The AP-funds are also criticized from other directions, including a Swedish Government Official Report (SOU) and by academic researchers at the Sustainable Investment Research Platform (SIRP). The funds have also been criticized for not complying with UN principles(2) where state run institutions are given a prime and guiding role in protecting human rights.
Swedwatch has been in contact with several of the AP-funds, the Ethical Council, researchers at SIRP, the Swedish Ministry of Finance and the Ministry for Foreign Affairs. Swedwatch’s recommendations to the government and to the AP-funds are based on the fact that the funds are managing public pensions. They should therefore act in line with public interests as part of their fiduciary duty. The parliament has required the funds to act responsibly regarding ethical and environmental issues. The findings of this report demonstrate that there are major gaps to fill in order to fulfill that requirement.
Swedwatch recommends that the AP-funds engage with the companies to promote that the companies act responsibly regarding social and environmental impacts from the mines.
The funds should develop actions plans for the engagement processes, including clear and time-bound goals and concrete actions if the goals are not met. The AP-funds should report regularly and transparently about the engagement processes to the public.
Swedwatch’s recommendation to the Swedish parliament and the government is to clarify the AP-funds fiduciary duty so that the funds do not act contrary to Swedish public policy on global and sustainable development. Swedwatch also recommends that the funds are required to demonstrate a credible engagement process in order to retain holdings in companies that are involved in severe violations of international norms.
The present regulatory framework limits the funds’ ethical and environmental consideration as it states that it may not impact the financial return negatively. Swedwatch recommends that this limitation is removed and that the funds in severe cases are allowed to prioritize ethics. A similar ethical prioritization is already applied in Swedish public procurement processes.
The funds should engage with more companies, integrate environmental and social issues in the investment process and increase the transparency of its guidelines and working processes. Important is also that the funds develop methods to evaluate and respond to reported violations that have not been confirmed by local authorities or a court.
(1) Three thousands of the funds’ total costs for the asset management.
(2) UN’s Guiding Principles on Business and Human Rights