Norway Throws Out Freeport
Published by MAC on 2006-06-07
Norway throws out Freeport
7th June 2006
In a ground-breaking decision last week, the world's largest pension fund declared its disinvestment from two major US companies. The first is Walmart, the second is Freeport McMoran Copper and Gold (Freeport-Rio Tinto).
The latter marks the only withdrawal so far that that the Norwegian Pension Fund has made from a mining company, and the first on primarily environmental grounds.
The Fund has followed recommendations made by the country's Council on Ethics, set up soon after the socialist-labour coalition came to power last year.
The Council drew to a considerable extent on evidence provided by MAC members, burning the "midnight oil" in order to confront the counter-arguments provided by Freeport in its defence.
The Council's conclusion is unequivocal: the Grasberg mine's riverine tailings disposal threatens "ireversible" effects, posing "unacceptable risks" and creating "severe environmental damage... of importance to future generations". While the company had argued that its reclamation efforts were beginning to succeed, it had offered little or no detail to back its claims.
The importance of the Norwegian government's decision should not be underestimated, although its investment in Freeport was a fairly modest US$20,000,000.
According to recent article in the London Guardian, some foreign ambassadors have been approaching the Fund's manager "asking what they can do to get their firms off the [banned] list or make sure they don't fall on to it."
Based on the "precautionary principle" the Fund's guidelines establish a benchmark for other investors to match - and indeed for itself in future.
But the Fund has stakes in many other mining companies, including Anglo American, BHPBilliton, DRD Gold, Oxiana, Vedanta, and Rio Tinto. It was the latter's major 1995 investment in Grasberg that enabled the US company to more than double production and the unacceptable discharge of tailings into the Ajkwa river system.
Rio Tinto holds onto its 40% joint venture agreement with the company.
[Nostromo Research, June 6 2006]