Hedge and pension funds blacklist Freeport

Large global pension funds have been slow to mobilise their power and take up the cause, nonetheless, over the years there has been some significant movement.

In June 2006, the Government Pension Fund of Norway, a sovereign wealth fund, announced it had dumped and blacklisted the Freeport’s shares in a widely reported statement due to concerns over Grasberg’s environmental track record. Freeport’s shares were dumped on ethical concerns that investment in the company posed an unacceptable risk of complicity in severe environmental damages. Specifically, the fund cited the devastating impact from the company’s riverine tailings disposal – the discharge of tailings into the local river system at Grasberg. In blacklisting Freeport McMoran’s shares the government fund said that it “believes that Freeport through this conduct is taking advantage of the low environmental standards and the lenient law enforcement in the country where it operates.”[1] The Grasberg mine has always used this means of tailing disposal and benefited from its very low cost.

The Fund’s investment committee detailed assessment of the risks concluded:

“Freeport’s mining activities involve an unacceptable risk of complicity in severe and irreversible damage to the natural environment. In the Council’s view, the company’s practice of riverine disposal is in breach of international standards, and one may also question whether the company violates national environmental regulations. The company’s assertions that its operations do not cause long-term irreversible environmental damage are hardly considered credible by the Council. The lack of openness and transparency in the company’s environmental reporting reinforces this impression.”[2]

The fund is one of the largest pension funds in the world with US$240 billion dollar under management at the time, and its detailed decision to blacklist the company remains a major public relations blow for Freeport. The fund has a very high profile internationally and its investment findings are both credible and influential. In releasing publically its reasons for blacklisting Freeport in a detailed and damning 30 page report, Freeport joined the dubious rarefied ranks of other companies blacklisted by the fund for reasons that included: production of cluster munitions, production of nuclear arms, sale of weapons and military material to Burma, production of tobacco, serious or systematic human rights violations, severe environmental damages, and serious violations of the rights of individuals in situations of war or conflict.[3] In 2008, the fund went on to likewise blacklisted Rio Tinto on account of its joint venture interest with Freeport in Grasberg.

Freeport denied any wrong doing in its response to the fund and said it felt misunderstood.[4] However, it appears to many that Freeport places little weight on the damage its project may cause to the environment and the health and safety of the indigenous communities around Grasberg in West Papua:

“The [Norwegian Government Pension Fund] is of the opinion that Freeport knew riverine disposal could cause severe damage to the natural environment, but that the company and the Government attached little importance to environmental concerns.”[5]

In October 2013, Swedish pension fund authorities announced the blacklisting of Freeport, also on account of the environmental damage it reported was caused by riverine tailings disposal at the Grasberg mine which has had “serious adverse environmental impacts that contravene the UN Convention on Biological Diversity”. [6]

Furthermore, and arguably most damning, New Zealand’s Superannuation Fund in September 2012 blacklisted Freeport McMoran from its investment funds on human rights grounds. It was the first major fund to blacklist Freeport on grounds that specifically include human rights breaches in West Papua, saying:

“Freeport McMoRan has been excluded [from the fund] based on breaches of human rights standards by security forces around the Grasberg mine, and concerns over requirements for direct payments to government security forces by the company in at least two countries in which it operates,”[7]

[1] Council on Ethics for the Norwegian Government Pension Fund – Global, Recommendation of 15 February 2006, p26. http://www.regjeringen.no/pages/1956975/F%20Recommendation%20Final.pdf

[2] Ibid., Council on Ethics for the Norwegian Government Pension Fund, p28.

[3] Norwegian Ministry of Finance, Companies Excluded from the Investment Universe, downloaded 7 October 2013. http://www.regjeringen.no/en/dep/fin/Selected-topics/the-government-pension-fund/responsible-investments/companies-excluded-from-the-investment-u.html?id=447122

[4] Terry Macalister, 7 June 2006 Biggest pension fund boycotts Wal-Mart, The Guardian. http://www.theguardian.com/business/2006/jun/07/supermarkets.asda/print

[5] Council on Ethics for the Norwegian Government Pension Fund – Global, Recommendation of 15 February 2008, p5. http://www.regjeringen.no/upload/FIN/etikk/Recommendation%20RT.pdf

[6] Jenny Denton, 18 October 2013 Swedish Pension Funds Divest Freeport McMoRan Holdings, Environmental News Service. http://ens-newswire.com/2013/10/18/swedish-pension-funds-divest-freeport-mcmoran-holdings/

[7] Jenny Denton, 18 October 2013 Swedish Pension Funds Divest Freeport McMoRan Holdings, Environmental News Service. http://ens-newswire.com/2013/10/18/swedish-pension-funds-divest-freeport-mcmoran-holdings/

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About mininganalystnow

Former Wall Street Analyst (working for SBC Warburg – now part of UBS) targeted by US and Australian intelligence agencies (FBI and ASIO) after publishing report touching on US State Department investigation into allegations US copper/gold mining company Freeport McMoran was involved in the killing of indigenous protestors in West Papua, Indonesia.
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