Investors with $3trn sign up to defend SEC conflict minerals rule

The group of investors campaigning to support the implementation of Section 1502 of the Dodd Frank Act have so far gathered the support of over 100 peers representing more than $3.75trn in assets under management, including international names such as Legal & General, HSBC Global Asset Management and Robeco.

This provision of Dodd-Frank is known as the conflict mineral rule and requires US-listed companies to trace and disclose the origin and supply chain of certain commodities mined in the Democratic Republic of the Congo (DRC) region.

The rule is seen by the group of investors, which includes numerous faith investors, as one of the few mandatory disclosures of human rights-related material risks, which they believe is under threat after an executive order draft from President Trump was leaked earlier this month suspending the rule for two years.

That came soon after Michael Piwowar, Acting Chairman of the SEC and long-standing 1502 critic, announced a 45-day stakeholder consultation (which ends on March 17). That is based on similar arguments to those raised by the White House’s, namely compliance costs.

Lauren Compere, Managing Director of Boston Common Asset Management, told RI that investors want this rule and described the official arguments as “misinformed” and occasionally “outright wrong”.

The number of signatories could increase before March 3, the deadline to support the initiative. After that the letter will be sent as a collective response to the SEC.

It is expected that the Conflict-Free Sourcing Initiative (CFSI), a multi-stakeholder organisation of more than 350 companies and associations, will submit their own response in support of the conflict minerals rule.

The letter, seen by RI, calls on the US Administration and the SEC to keep a rule they regard is of critical importance.

The letter states: “Through regulated disclosures, not only do companies and investors benefit, but we all indirectly contribute to a peaceful, prosperous, and stable conflict-free minerals trade in the DRC region, thereby further advancing respect for human rights in the global supply chains of US companies.”The investors quote data by the International Peace Information Service which found that 79% of tin, tantalum, and tungsten miners surveyed now work in conflict-free mines; that 204 mines have been officially certified as conflict-free; and that 75% of smelters/refiners worldwide, for the four conflict minerals, have passed audits by the Conflict-Free Sourcing Initiative or associated programs.

Before the rule came in, estimates for its compliance costs were as high as $8bn. But the actual cost has been calculated by Tulane University at $709m – or $20,000 per company per year.

Meanwhile, in a further show of investor action in the US, investors with a combined $11trn have come out in opposition to the Texas bathroom bill. They claim the Texas Senate Bill 6 “openly discriminates against the LGBTQ community”. They say the bill “may have troubling financial implications for the investors’ portfolio companies operating in Texas”.

Conflict minerals: lead investor signatories:
Boston Common Asset Management
ICCR
Mercy Investment Services
Responsible Sourcing Network
Trillium Asset Management
US SIF: The Forum for Sustainable and Responsible Investment

Supporting signatories (selected):
Sweden’s AP1, AP2, AP3 and AP4
BNP Paribas Investment Partners
Hermes EOS
HSBC Global Asset Management
NorthStar Asset Management
PGGM
Robeco
Rockefeller & Co
Standard Life Investments
Triodos Investment Management
Zevin Asset Management