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The deaths of close to 300 people in yet another major accident at a Brazilian dam has reopened debate about the role of investors in policing standards across the mining industry.
The mining waste dam is owned and run by Vale, the world’s largest iron ore producer. The breach of the dam in January in the south-eastern municipality of Brumadinho was also the second major accident at a dam owned by Vale in less than four years.
The tragedy has prompted demands for improved disclosure about safety practices at waste dams from mining companies across the world.
The Investor Mining & Tailings Safety Initiative, led by institutional investor the Church of England Pensions Board and the Swedish Council of Ethics, which advises the country’s pension funds, has drawn support from a total of 96 institutional investors. The group has asked 683 mining companies for detailed information on the size and safety records of their waste dams.
No official global record exists but estimates suggest that of around 18,000 mining waste dams worldwide, approximately 3,500 are currently active. “We need to know where these facilities . . . are located, how they are managed and the potential for failure,” says Adam Matthews, director of ethics and engagement at the Church of England Pensions Board.
The investors have asked miners to disclose data, verified by the company chair or chief executive, by June 7.
“The intention is to ensure that there is no recurrence of the disasters [such as those] involving Vale,” says Henrik Pontzen, head of ESG at Union Investment, the €323bn Frankfurt-based asset manager, which has signed up to the initiative.
At the same time, demand for resources such as copper and cobalt is expected to rise as governments around the world promote clean technologies such as electric cars, in an effort to tackle climate change.
“Mining is integral to the task of lifting hundreds of millions of people in the developing world out of poverty, and to help the global economy achieve the transition to a more energy-efficient future,” says Meryam Omi, head of sustainability at Legal & General Investment Management.
Yet growing investor demand for strategies that incorporate robust ESG metrics has led to more determined efforts to evaluate risks across the mining sector.
Macquarie, the Australian bank, recently constructed a framework that ranks Vale as the second-worst ESG performer among listed diversified miners. Vale scored badly on fatalities, reporting of environmental fines and the low percentage of women in its workforce. It did not respond to a request for comment.
For its part, last month Vale created a special executive board to co-ordinate humanitarian and environmental recovery efforts in and around Brumadinho. The company has so far paid about $25,000 each to 274 families of the victims. It has also agreed to make emergency payments to all Brumadinho residents.
Grant Sporre, an analyst with Macquarie in London, says he expects the framework to evolve as disclosure standards improve. “Even with this imperfect tool, there is a reasonable correlation between our ESG ranking, share price performance and valuation.”
In April, S&P Global Ratings, the research provider, published what it calls an ESG risk atlas to compare different industries.
The tool, which it says will eventually feed into its company credit ratings, includes a “preparedness” metric that assesses a business’s capacity to anticipate and adapt to a variety of disruptions including natural disasters.
Good corporate governance includes the capacity for a company to respond to the “full spectrum of risks”, says Michael Ferguson, an analyst with S&P Global in New York.
Some mining companies, including Rio Tinto, BHP Billiton and Anglo American, have attempted to allay investor concerns by linking executive pay to health and safety metrics. But Ms Omi says more needs to be done to link pay incentives to performance on sustainability.
“If mining companies do not take more steps to improve their culture, and the links between executive pay and ESG standards, then it is clear that investors will act proactively in pushing for change,” she says.
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