Rio Tinto hit by exclusionOctober 2008
Rio Tinto has expressed dismay at being dropped on ethical grounds from one of the Norwegian government’s pension funds.
The global Government Pension Fund, commonly known as the oil fund, announced last month that it had sold its NKr4,849billion ($848million, £474m) holding in the mining company because of the finance ministry’s ‘unwillingness to run an unacceptable risk of contributing to grossly unethical conduct’ at the vast Grasberg gold and copper mine in Indonesia.
Kristin Halvorsen, Norway’s finance minister, said the mine, which is located in a national park on the World Heritage list and will cover 230sq km (88.8sq miles) when fully completed, has caused ‘severe environmental damage’ and that there have been ‘no indications... that measures will be taken to significantly reduce damage to nature and the environment’.
Last year campaign group War on Want claimed also that people living near the mine had suffered human rights abuses connected with the use of local security services to protect the facility.
Rio Tinto said it was ‘surprised and disappointed’ by the decision taken on the basis of a recommendation of the fund’s Ethics Council, and indicated that the fund had not previously made the company fully aware of its concerns. The mine is operated by the US company Freeport-McMoRan, but Rio Tinto holds a 40 per cent stake, and the facility contributed £88m ($159m) to Rio’s profits of £4bn last year.
Rio Tinto said it ‘co-operates closely with Freeport in operational, social and environmental matters’ and was ‘confident that all steps have been taken to ensure that the mine is operating satisfactorily from an environmental viewpoint’. It added that ‘regular audits’ confirmed this. The company has said it will contact the Norwegian government ‘to ensure that they are aware of the factual position regarding the performance of the Grasberg mine and its impact on the local environment’.
The sovereign fund, which is noted for its SRI policies, said it had excluded Freeport-McMoRan in 2006 over concerns about Grasberg and was now excluding Rio Tinto because it had not contributed to any improvement in the intervening period. The Ethics Council says it first raised its concerns with Rio Tinto in December 2007 and there had been an exchange of letters on the subject.
One of the government’s main worries is the daily discharge of 230,000 tonnes of waste known as ‘tailings’ into a river. It says there is a ‘high risk’ of ‘lasting ground and water contamination’ and in this appears to be backed up by Friends of the Earth, which reports toxic levels of selenium and arsenic in nearby river systems. Rio Tinto maintains the tailings are harmless natural rock particles. Grasberg is the biggest gold mine and the third biggest for copper in the world.
UK-based Ethical Investment Research Services said the decision could have wider ramifications. ‘Other investors do look to that fund as a leader in responsible investment’, it said. ‘Norway’s decision sends a strong signal and could be an effective driver for change.’
The Norwegian fund has excluded 26 companies from its investment universe on social and environmental grounds since 2002. Another mining group, Vedanta Resources, was removed on such grounds last year.
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