The Securities and Exchange Commission has charged Vale, one of the world’s largest producers of iron ore, with misleading investors over the safety of its Brumadinho dam over the three years before its collapse killed 270 people.
The SEC alleges that from 2016 Vale manipulated safety audits, obtained fraudulent stability certificates and misled local governments and communities over the safety of the Brumadinho dam, while its public sustainability reports claimed that the firm adhered to “the strictest international practices” in evaluating dam safety, and that all of its dams were certified to be in a stable condition.
The case is the first confirmed outing for the US regulator’s Climate and ESG Task Force, which was formed in March last year to identify “material gaps and misstatements” in issuer ESG disclosures.
Melissa Hodgman, associate director at the SEC’s enforcement division, said: “While allegedly concealing the environmental and economic risks posed by its dam, Vale misled investors and raised more than $1 billion in our debt markets while its securities actively traded on the NYSE.”
Yesterday’s filing, at the US District Court for the Eastern District of New York, showed that the SEC will “aggressively protect our markets from wrongdoers, no matter where they are in the world”, she added.
Vale’s CEO and three senior executives resigned shortly after the disaster and a wave of divestment followed. Norges Bank Investment Management sold an NKr6.6 billion stake (worth €600 million at the time) the following year, while the Church of England’s investment bodies ditched a £10 million holding.
A group of investors led by the Church of England Pensions Board and Sweden’s AP funds has since developed a new global standard for tailings safety, which mining companies worth a third of total global market capitalisation have committed to adopt. Earlier this year, some of the world’s largest asset managers announced plans to step up their engagement with global miners over tailings safety, while the Church of England Pensions Board said it would vote against board chairs at companies that failed to make a commitment.
As of January this year, a further 12 incidents involving the collapse of tailings and waste facilities have occurred, with one incident in Myanmar leading to the loss of 126 lives.
A spokesperson for Vale said the company “denies the SEC’s allegations, including the allegation that its disclosures violated US law, and will vigorously defend this case. The company reiterates the commitment it made right after the rupture of the dam, and which has guided it since then, to the remediation and compensation of the damages caused by the event”.
In an investor presentation published ahead of its AGM today, the company said it will have paid $3.8 billion in reparations for the families of victims and support for local communities by 2026.
Jaime Gornsztejn, mining sector lead at engagement specialists EOS at Federated Hermes, said Vale had been responsive to EOS’s engagement after it pressed for a refreshment of the board and senior management. He added that EOS has seen “significant progress” on the safety framework and board oversight and would continue to engage on reparations and implementation of the investor-developed Global Industry Standards on Tailings Management.
The announcement did not appear to have spooked investors. Vale shares were up 3.7 percent on the day on Thursday following the SEC’s announcement.