Private Sector Voluntary Codes & ESG (Market-Orientation & Litigation Safe Harbors)?

1/5 For general understanding, it helps to contemplate the idea that private sector developments are still steered somewhat by efforts at a higher level to encourage adherence to “international standards” and the like beyond legal obligations.  For general background, watch the video “Promoting Social Change Through the Private Sector” (Harvard Kennedy School video 10/16/20).

2/5 For some fun concerning the odd contretemps of investment adviser and government opinion surrounding ESG, compare

a. Larry Fink (Blackrock CEO), A Fundamental Reshaping of Finance (2020 Annual Letter to CEOs, now on climate change and sustainability as investment concern; see also the linked sustainability letter to Blackrock accountholders)

and

b. Lauer, “BlackRock CEO’s Letter is a Watershed Moment for Climate Change: The First Name in Capitalism Has Taken a Strong Position: Will His Peers Follow Suit?” (InsideHook, 01/15/20)

with

c. Norton, “Sustainable Investing: New Labor Department Guidance Takes Aim at ESG Investing” (Barron’s 06/24/20)

and

d. Kennedy, Hurst & Crowley, “BP Walks Away from the Oil Supermajor Model It Helped Create” (Bloomberg 08/04/20)

e.  David vs Goliath: Inside Engine No. 1 Activist ETF (watch the podcast)

3/5 The private sector has embraced a variety of voluntary principles in the environmental and social impact areas:

a. Read the Equator Principles in its entirety (addressing financial institution involvement with project finance in terms of social and environmental impact)

b. and for a broader view of sectoral codes in the natural resources area see Besada & Martin, Mining Codes in Africa: Emergence of a “Fourth” Generation? (NSI 2013; providing some insight into what private investors should expect now when they propose a large natural resource-based project in a developing country– the natural resource “best practices” codes tend to be associated with Canadian and Australian initiatives, perhaps because of their relatively large natural resource sectors).

4/5 To get a better sense of the underlying social and environmental issues in the Freeport McMoran situation, beyond the Norwegian Government Petroleum Fund fact-finding report, please consult for the indigenous peoples’ viewpoint:

a. You Tube Video: Irian Jaya – Indonesia as a general presentation of effects on the native Papuans of development and government policies beyond the Freeport Grasberg mine as of 1995, recalling that the Freeport ATCA suit was filed in 1996 (note there is a cameo interview with Tom Beanal as Amungme tribal leader and named plaintiff under the Freeport ATCA lawsuit– so how does the tenor of the half-hour journalists’ film comport with the legal complaint?).

b. Understand also that Freeport McMoran as company was largely unpopular among ordinary Indonesians as well as local politicians under a narrative that they unfairly extracted excessive amounts of wealth from the nation for years under a former authoritarian regime, which held power up to 1998, such that to obtain their latest twenty-year extension of their mining concession as a condition they transferred control over the Grasberg mining operations to an Indonesian state-owned enterprise, compare

1. Sulaiman, “A guide to understanding the Freeport divestment deal,” JP, 07/16/18

With

2. “Freeport-McMoRan Announces PT-FI Divestment Agreement with PT Inalum” (Freeport Press Release 09/28/18)

Note the essential silence in the divestment discussion of anything relating to the Papuans, or their complaints.

5/5 To understand the approach and scope of more successful social and environmental impact reports and planning look like in practice, see British Petroleum’s (BP) efforts under the linked sources on environmental and social effects of the Tangguh LNG project, including human rights and social impacts compliance as case study.

Copyright 2020–21 © David Linnan.