US and European funds confront copper mine giant Freeport-McMoRan on environment

Investors seek specialist to be appointed to the board to manage risks.

A coalition of some of the world’s biggest pension fund investors from Europe and the US is campaigning to persuade shareholders in Freeport-McMoRan, the US-listed copper producer – the largest in the world – that it should clean up its controversial pollution record by appointing an environmental expert to its board. The five New York City Pension Funds have joined forces with APG, which manages the €173bn assets of the Dutch ABP pension fund for civil servants, the Swedish government AP pension buffer funds, and the General Board of Pension and Health Benefits of the United Methodist Church in the US, to put the proposal on the ballot at Freeport’s June 11th annual general meeting in Wilmington, Delaware. The investors are going head to head with Freeport’s board of directors, which has unanimously recommended that shareholders oppose the motion. Freeport said: “As a corporate governance matter, our board does not believe that it is in our shareholders’ best interests to require a particular type of specialist on our board. We believe that our board of directors represents a diverse group of individuals with broad experience in geology, business, finance, international relations and public affairs.”The company’s environmental record has been a regular target of institutional investor ire. In 2006, the huge Norwegian Government Pension Fund blacklisted the company over its disposal of waste tailings into a local river at its Grasberg mine in West Papua, Indonesia. Investors say the practice is illegal in many countries. Earlier this year, the Norwegian fund also pulled €551m in investments from Rio Tinto, the London-listed international mining group, because of a joint venture with Freeport at the Grasberg mine. In the latest campaign, the Freeport investors say the company has been slow to issue what they consider to be full information on its assessment and monitoring of environmental and health risks associated with the tailings disposal at Grasberg. The funds say this is damaging to their interests as shareholders because of risks that its environmental performance falls short of internationally accepted standards leading to difficulties in accessing capital for new projects and obtaining necessary regulatory licences. Freeport says it has consistently met internationally acceptable standards for environmental management. The investors said: “We believe it could be highly beneficial for the

company to address the environment at the most strategic level in the same way that it has addressed human rights – in other words, to appoint an appropriate specialist to the board. We envisage a board director whose background combines acknowledged environmental commitment and expertise with leadership experience in a business or other appropriate context. This appointment would place Freeport at the forefront of board-level practice on environmental and social issues in the mining industry.”
The investors hope to mirror the success of a 2005 campaign led by institutions including the New York CityPension Funds that was critical of Freeport’s human rights practices and links with the Indonesian military. Freeport subsequently commissioned the independent International Center for Corporate Accountability at City University, New York to carry out two audits of Grasberg and appointed Judge Gabrielle McDonald as a director and special counsel on human rights. The investors say Freeport appears to have responded positively and transparently on human rights.
APG and AP will be speaking at Integrating ESG into Portfolios, New York, 25th June