Engagement: in dialogue with the largest mine operators
The universe of investable companies in the field of “cleaning the oceans” is very small. Consequently, shareholder engagement is a promising way for investors to address the subject of the potential negative impacts on the oceans and to simultaneously incentivise companies to demonstrate better environmental behaviour.
In light of the general business model, at the global level, mining companies account for the biggest share of negative environmental impacts that lead to marine pollution.
Raiffeisen KAG’s shareholder engagement activities include dialogue with the largest global mine operators in this field. Around 20 mining giants, such as BHP, Rio Tinto, and Vale, were contacted and asked the following questions:
What measures is your company taking to minimise the environmental impacts of its mines in terms of marine pollution and what environmental management systems have been put in place to prevent pollution in the case of a disaster and how are these environmental impacts monitored?
With the current development of gold prices, gold producers are coming more and more into focus for investors. The world leader in this field is the company Newmont Mining, which is included in the Standard & Poor’s 500. In response to our enquiry about marine environmental impacts, the company referred us to its “Environmental Management and Monitoring Program”. Newmont’s site with the potentially biggest negative impacts on the marine environment are located on the Lihir island group, north of New Ireland in the south-west Pacific. Using the Monitoring Program, Newmont is able to objectively measure the water quality and the surrounding coral reefs and fish populations in this area. According to Newmont, there is no alternative to using the ocean as storage for waste, but attempts are made to keep the environmental pollution as low as possible using chemical stabilisation and dilution.
How does your company handle the disposal of hazardous wastes and chemicals from its mines?
In many cases, the ores that are extracted contain all kinds of toxic substances. The most important aluminium ore is bauxite. However, bauxite contains significant traces of highly toxic substances such as arsenic and mercury. Consequently, proper handling of these ores and the residues created during processing is extremely important in order to prevent possible environmental problems. China Hongqiao Group is the world’s largest aluminium producer, with revenues of around USD 7 billion and is thus responsible for a large portion of bauxite waste products. The company has developed a “Plan for the Management of Hazardous Products and Residues”, establishing comprehensive regulations for the substances produced and their storage, as well as clearly defined processes for their disposal.
Circular economy requires much more than just recycling, and consequently waste prevention and reutilisation represent a fundamental aspect of this plan. In addition to specific measures for the handling of hazardous wastes and chemicals from the mines, particular attention is paid to keeping all substances away from oceans and rivers in the course of maritime and river transport. Regulations are in place which mainly involve the disposal of hazardous wastes from shipping activities (e.g. used oil).
In order to continuously implement and comply with the plan, China Hongqiao Group regularly engages independent auditors to perform annual checks of the systems.
Is the water quality measured in the vicinity of your mines, and if so, can you provide us with the relevant data?
Companies need proper data in order to be able to establish goal-oriented environmental management systems. The quality of the measures taken can only be evaluated with precise measurements, which are intended to ensure a higher water quality in the area of the mines, which in turn has an effect on marine pollution. The Brazilian company Vale is the world’s largest supplier of iron ore, with a market share of 35%. At various locations, the group has 2,600 monitoring points, which delivered more than 400,000 data points on water quality last year. According to Vale, water quality measurements allow for operational control in real time. As a result, possible negative impacts are easier to predict with the use of forecasting models, which allow the companies to take countermeasures in good time.
What investments has your company made in sustainable mining practices and technologies to protect and maintain the marine environment?
Environment protection requires investments. In its conversation with Raiffeisen KAG, the company Anglo American presented what it says is the largest water recycling project in Brazil. Stretching 525 kilometres, the iron ore pipeline from Minas to Rio de Janeiro is the longest of its kind in the world. It allows for the transport of 26.5 million tonnes of iron ore per year, which moves through the pipeline as a slurry. In 2021, the company announced that it would start recycling the waste water from this pipeline, in cooperation with the harbour of Açu. Release of the waste water into the sea will be stopped and the newly generated water will help reduce the decline in local water tables. Raiffeisen KAG will continue to keenly monitor Anglo American’s efforts, in particular the Minas project.
Using shareholder engagement as a component of active management, investors are able to highlight important sustainability issues for companies. Investors in the funds participate in this process by way of their investment. However, it is also the case that companies in which there is no investment can be incentivised to take a more sustainable approach to the environment and society through shareholder engagement.
Author
Mathias Zwiefelhofer, Corporate Responsibility Raiffeisen Kapitalanlage GmbH