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In This Issue
Editor's Note
What Conflict Minerals Mean to Investors
Growing regulatory, stakeholder, and media pressure around conflict minerals—defined as tin, tantalum, tungsten, and gold—is pushing companies to increase their efforts to remove these minerals from their supply chains. Chinese companies listed in the United States and in the supply chains of U.S.-listed companies are no exception. With serious potential implications—such as supply constraints, buyer pressure, and brand risks—it’s critical that investors understand this issue so they can identify potential at-risk companies and help them address this issue in their supply chains.
In this issue’s feature article, BSR Advisory Services Manager Marshall Chase offers some initial steps that investors in Chinese or other companies can take to address this issue, including understanding the issue and the implications for investment targets, integrating the issue into investment due diligence, and actively engaging with relevant companies.
Also in this issue, UN Principles for Responsible Investment’s (PRI) James Gifford shares why investors should report on their ESG integration and active management practices in order to increase transparency, share best practices, and advance the overall sustainable investment agenda.
Feedback and comments on this newsletter are encouraged and should be directed to Julie Zhu at jzhu@bsr.org.
In Depth
Investor Opportunities in Addressing Conflict Minerals in Supply Chains
BSR Advisory Services Manager Marshall Chase explains why conflict minerals matter to companies and investors, and he explores how investors can identify at-risk companies and engage with them on this issue.
Learn more →
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Insight From the UN PRI
Principle 6: Transparency and Reporting
The PRI Principles encourage investors to ask companies to improve their disclosure and performance on ESG issues. Investors also need to be transparent about how they use ESG information in their investment decisions and ownership activities. The final PRI Principle asks signatories to report on their activities and progress toward implementing the Principles. At the heart of Principle 6 is the belief that comprehensive disclosure is essential to investors becoming more accountable to beneficiaries, clients, and wider society.
One method for investors to report on their activities and share their experiences is by completing the annual PRI Reporting and Assessment survey. The survey includes 88 questions for both investment managers and asset owners and has the following objectives:
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It’s a learning tool to help signatories monitor their organizations' progress on implementing the Principles. The process provides a detailed, principle-by-principle analysis of implementation, with peer comparisons, both locally and internationally, and over time.
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It provides an opportunity for the PRI Secretariat to identify best practices, interesting developments, and practical implementation ideas, and share these with signatories through case studies, articles on the PRI extranet, and webinars.
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It serves as an accountability mechanism for both signatories and the PRI Initiative.
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It provides an “off-the-shelf” reporting framework that can be used by signatories to report to clients, beneficiaries, customers, and the broader public on their responsible investment activities.
In 2011, more than 40 percent of investors publicly disclosed their survey responses, which are available at www.unpri.org/report11. Starting in 2013, all PRI signatories will publically disclose parts of their responses on the PRI website.
OTHER RESPONSIBLE INVESTMENT REPORTING
In addition to the Reporting and Assessment survey, many investors publicly disclose their proxy voting policy—55 percent of investors did so last year. Some major pension funds such as CalPERS—the largest state pension fund in the United States—use voting as a primary means to influence a company’s operations and governance. CalPERS votes more than 7,000 times annually, and one of their underlying tenets is to make its voting decisions public on its website. Often, this is done in advance of annual meetings, which allow it to:
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Demonstrate how they value strong ESG performance.
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Provide a proactive forum to encourage support from other investors.
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Open up dialogue avenues with corporate boards, investors, and other stakeholders.
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Show a leadership standard.
Throughout this article series we have been highlighting some best practices for investor activities in the implementation of the PRI Principles. In five years, the Initiative has grown to 850 signatories and US$25 trillion assets under management, indicating that responsible investment is becoming a core activity for many investors. The six Principles are aspirational, and while there is no minimum requirement for investors, it’s clear that investors are “racing to the top” in their reporting, integration, and engagement on ESG issues. This is not just a feature for large investment managers, but for smaller funds too.
We welcome the involvement of Chinese institutional investors in the PRI Initiative.
To find out more about the PRI or how to become a signatory, please visit www.unpri.org/sign.
News to Know
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Haijiu’s IPO at Risk Due to Pollution Investigation (May 9, China Green News)
Haijiu battery company has been suspected of poisoning 31 people in April despite passing an environmental impact assessment last year. Haijiu had been preparing to list on the stock market but if it is found to be responsible for the pollution incident, the company may not be able to list for another 36 months, according to regulations from the China Securities Regulatory Commission.
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Parts of Yangtze River Closed to Shipping Due to Drought (May 12, The Telegraph)
Due to drought, a 140-mile stretch of the Yangtze river—whose basin is responsible for 40 percent of the country's economic growth—has been closed to ocean-going vessels because of the shallow water. Droughts are now not only impacting agriculture, industry, and drinking water, but also transportation and logistics.
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Twenty-two Companies On the 2010 China Green Companies List Omitted from 2011 List (May 19, China Dialogue)
Twenty-two of China’s best-known companies, including online marketplace Alibaba, internet portal Tencent, and car manufacturer BYD, are missing from this year’s list of the country’s most environmentally friendly businesses—the China Green Companies Top 100—after being eliminated due to problems with corporate reputation, greenwashing, and poor market performance.
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Chinese Mining Companies Criticized for Irresponsible Practices in Philippines (May 21, Philippine Daily Inquirer)
A report by Pacific Strategies and Assessments has found evidence of unaccountability, misconduct, and corruption in many Chinese mining deals in the Philippines. It alleges that the entry of Chinese firms exposes the Philippines to irresponsible mining practices that do not deliver correct compensation for environmental damage and value of minerals extracted from devastated mining areas.
On the Horizon
Upcoming Events
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China Venture Capital and Private Equity Forum (June 8-11, Shenzhen)
Hosted by the Ministry of Science and Technology and the Government of Shenzhen among others, this forum will include a discussion on social responsibility and a panel on how to create sustainable prosperity.
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Energy for All Investor Forum (June 21, Manila)
Organized by the Asian Development Bank, this event will feature presentations on three game-changing project models in the access to energy space and three innovative financing mechanisms followed by a panel discussion on how to achieve the Energy for All Initiative’s goals.
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Clean Technology Investment World Asia (July 11-14, Singapore)
Organized by Terrapinn, the conference claims to be the largest clean tech investment conference that is focused on the Asia-Pacific region. It will include interactive panel discussions, speed networking, live debates, and project showcases.
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