“In our cynical society, it’s usually the case that mining firms construct up their earnings whereas not reporting to their shareholders the environmental and social prices which are absorbed by the encompassing poor and disempowered communities.” In Johannesburg, Mariette Lifferink was brimming over with this infected thought as she composed a letter to the US-based financial institution J.P. Morgan to specific her outrage on the firm’s misdeeds.
Lifferink, who’s president of the South African NGO Federation for a sustainable surroundings, addressed her letter to Chuka Umunna, world head of sustainable options on the world’s largest asset supervisor. She was warning the previous British Labour MP-cum-ethical banker that J.P. Morgan’s supposedly inexperienced funding funds had been really sponsoring water air pollution in her dwelling province, as a substitute of guaranteeing clear water and respect for human rights. In Mpumalanga, which borders Mozambique and Eswatini within the east of South Africa, folks have been thirsty and unwell for many years due to soiled coal mining.
Lifferink maintained a civilised tone in her letter: “It’s trusted that this disclosure of alleged non-compliance with environmental laws, air pollution, ecological degradation and environmental danger, will incline you to conduct a due diligence course of to find out whether or not Glencore’s South African operations are compliant with JP Morgan’s standards for funding”.
Will J.P. Morgan’s ‘simply transition’ prophet take care of water pariahs ?
The son of a Nigerian former businessman and Irish-English mom, London-born Chuka Umunna was promoted to his present position in July 2024, having joined the US financial institution in 2021. On the time, he was the lead adviser on the agency’s environmental, social and governance (ESG) efforts in Europe, the Center East and Africa. Umunna’s position is to assist the Wall Avenue titan’s purchasers around the globe enhance their sustainability efficiency.
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Self-styled eco-conscious Umunna could have missed or missed the Johannesburg-based activist’s criticism. The picture he likes to convey in his public speeches on sustainable enterprise doesn’t appear to use to South Africa. Take, for instance, this quote from one in all his early interviews since he took workplace at J.P. Morgan: “Younger folks right this moment do not simply need to develop the household fortune, they need to use their cash to save lots of the world”.
In her message, Lifferink referred to J.P. Morgan’s green-labelled share and bond holdings in Glencore, the world’s largest multinational mining firm, which relies in Switzerland and listed on each the London and Johannesburg inventory exchanges. She cited reviews, obtained confidentially from the South African authorities, proving that Glencore has relentlessly launched extra poisonous pollution into the water system on which locals, principally from lower-class black communities, rely for consuming, fishing, farming and cattling. She argued that Glencore’s wrongdoing was not in line with the sound water administration promoted by J.P. Morgan’s inexperienced funds.
And but each the pension fund arrange by J.P. Morgan for its UK workers (which supplies a lavish allowance for present and future retired managers, together with Umunna himself) and people arrange by different employers within the nation are making the most of the identical funds which are greenwashing water air pollution in South Africa, regardless of all of the discuss of accountable funding.
Lifferink by no means heard again from Umunna. That is unsurprising, since J.P. Morgan has a longtime trusted relationship with Glencorethe US financial institution has additionally organized all of its bond issuances (that are primarily loans – a key manner that Glencore makes cash) and has usually suggested buyers to purchase Glencore shares.
J.P. Morgan champions (un)sustainable investing in Glencore
EU laws on inexperienced finance (the Sustainable Finance Disclosure Regulation, generally known as SFDR), which got here into pressure in 2021, requires asset managers to reveal each the environmental and social advantages and detrimental impacts of the actions through which they make investments. However the hope that better transparency would encourage buyers to shift capital to extra sustainable investments has usually been annoyed by monetary establishments’ deceptive ways. Exploiting loopholes within the regulatory framework, asset managers have massively channelled investor cash into funding merchandise marketed throughout Europe to greenwash harmful actions.
With 16.7 million tonnes of direct carbon emissions in 2023, Glencore is likely one of the world’s greatest greenhouse fuel emitters. It attracts funding by funds promoted as ESG merchandise (environmental, social and governance enhancements), as our analysis has proven. The worth of the Swiss multinational’s shares and dividends skyrocketed all through 2022 as Europe was immediately compelled to interchange Russian fuel with different vitality sources within the wake of Vladimir Putin’s full scale invasion of Ukraine. The EU market exponentially elevated its coal imports from South Africa. Dozens of asset managers seized the chance to spice up the returns of their inexperienced investments by shopping for and promoting the Swiss mining large’s shares and bonds. In doing so, they hid the dangerous results of coal behind bespoke due diligence methodologies, guaranteeing that their portfolios had been formally compliant with lax EU necessities.
For the reason that European legislation on inexperienced finance, or SFDR, got here into pressure within the second quarter of 2024, asset managers have invested a median per trimester of $790 million in Glencore by their inexperienced funds. These embody $798.5 million invested by two mislabelled merchandise based on the brand new fund naming pointers adopted in Could 2024 by the European Securities and Markets Authority (ESMA). Previous to 2022, many of the 10 asset managers who profited most from their inexperienced fund investments in Glencore made losses. They’ve made virtually $570 million for the reason that begin of the Russia-Ukraine warfare when Glencore’s shares worth and dividends peaked (as defined above), in February of the identical 12 months, with only some making modest returns of round $13 million earlier than that.
J.P. Morgan ranks second within the world “green-painted” rush on Glencore’s inventory market. Its UK subsidiary has marketed investments price an annual common of $54.8 million and has continued to purchase shares within the Swiss firm relentlessly. Its publicity, which is bigger than that of some other asset supervisor, elevated by $14.15 million between the primary and second quarters of 2024. The newest obtainable knowledge from the second quarter present that J.P. Morgan holds a complete of $43.34 million price of shares.
Over 20% of this worth is held within the two funds with the ESG label, which ESMA pointers prohibit for investments in fossil fuels reminiscent of coal (1).
Greater than 20% of Glencore’s “inexperienced” investments ($57.3 million) held by the ten most uncovered funds (marketed by varied asset managers) are at the moment within the fingers of J.P. Morgan, whose questionable sustainable guess on Glencore goes past the inventory market. From the start of the all-out Russian invasion of Ukraine (within the first quarter of 2022) till the second quarter of 2024, JP Morgan could have made as much as $46 million by including $7.7 million Glencore shares to its investments. The US financial institution has additionally lent Glencore thousands and thousands by inexperienced funds which underwrote company bonds issued by the Swiss firm between 2021 and 2024. These funds straight subsidised Glencore’s coal operations in South Africa.
All of J.P. Morgan’s inexperienced funds replicate comparable EU-required sustainability disclosure paperwork (primarily based on a standard template), albeit underneath totally different names and investing in several sectors and areas. This permits the providing to be diversified and tailor-made to buyers’ wants, whereas following the identical ESG technique.
Glencore water air pollution makes a mockery of public legislation and well being
9-thousand kilometres from Umunna’s desk, within the southern hemisphere, J.P. Morgan’s investments look lots much less inexperienced. Water overuse and air pollution from coal mining is likely one of the foremost causes of the power water disaster affecting greater than 4.2 million folks dwelling across the Olifants River catchment in Mpumalanga. This scourge has till lately been within the information (2) in eMalahleni (100km east of Johannesburg), the third largest municipality within the province with a inhabitants of 450,000. The availability system doesn’t meet minimal consuming water high quality requirements because of the widespread infiltration of chemical compounds, making residents in poor health, principally with diarrhoea.
A lot of the air pollution comes from the handfuls of South African energetic coal mines (along with these which were closed however not decontaminated), which account for round 90% of the nation’s coal manufacturing. Through the years they’ve additionally devastated the fertile wetlands and aquatic life on which individuals’s livelihoods rely, a coal-driven catastrophe a number of scientific research have confirmed (3).
The native administration states that it has been “unable to take advantage of groundwater assets on account of underground coal mining”, ensuing within the “emission and dispersion of acid mine drainage”. That is even though it has dedicated to bettering the protection of the water, a lot of which comes from the Olifants catchment space.
Glencore, one in all South Africa’s largest coal producers with three wholly-owned and three way partnership operations, operates its largest mine (and the nation’s third largest in 2021) about 20km south-west of the regional capital, eMalahleni. The Tweefontein mine, which is partly open pit and partly underground, has elevated its manufacturing to virtually 20 million tonnes per 12 months, based on South African Division of Water Sanitation (DWS) knowledge for 2021.
In 2019, the activist legislation agency Middle of Environmental Rights (CER) included Tweefontein and Goedgevonden (additionally owned by Glencore) on its blacklist of South African coal mines that violate nationwide water legal guidelines. Compliance with the water administration and high quality necessities hooked up to the mining licence is a compulsory situation for persevering with operations. Regardless of this, the administration of the Tweefontein mine has made little progress and has defied repeated warnings from the nationwide authorities to supply efficient wastewater therapy, and to cease the extreme air pollution that has effects on the availability of unpolluted water to downstream communities.
The federal government has taken no coercive motion to pressure Glencore to conform totally. “Our delinquent authorities give in to the pressures of the coal mining business and wouldn’t have the center to implement our legal guidelines,” Mariette Lifferink advised Voxeurop.
The South African activist secured proof of Glencore’s continued illegal behaviour by Freedom of Info (FOI) requests to the Division of Water and Sanitation (DWS), the federal government company answerable for these issues. The DWS offered her with unique information (seen by Voxeurop), detailing the path of fraud noticed by public inspectors since 2017. A number of the violations additionally affected Glencore’s two different mines within the nation (Goedgevonden and iMpunzi). In keeping with a 2021 monitoring report, many prior violations recognized on the Tweefontein website are nonetheless unresolved (4). Specifically, a number of pollution discharged into the Tweefontein Spruit, a river which flows by the Tweefontein mining concession, continued to exceed the focus limits set out within the Water Use Allow, which is on the best way to be renewed nonetheless.
The identical applies to the opposite rivers (Zaaiwaterspruit, Klippoortjiespruit and Rietspruit) that the Tweefontein River crosses exterior the mine boundaries. These contaminated rivers are tributaries of the broader Olifants River (managed by a particular authority), whose catchment space is a very powerful within the province, offering water for home use, fishing, agriculture and ecosystems stretching so far as the enduring Kruger Nationwide Park. A follow-up inspection in 2023 discovered that, regardless of some enhancements, contaminated run-off and poisonous deposits remained on the mine, and that Tweefontein’s water as soon as once more didn’t meet ample high quality requirements to be launched from the reservoir into the water provide community.
In March 2024, the Tweefontein Complicated website supervisor despatched a letter to the DWS making new commitments to successfully implement the remediation plan agreed with the inspectorate two years earlier. Each the DWS and Glencore declined to touch upon the difficulty, which follows different environmental and human rights controversies through which the world’s main coal, copper and zinc producer has been concerned through the years, primarily in Peru and Colombia.
J.P. Morgan-Glencore greenwashing present should go on
Like some other asset supervisor, J.P. Morgan depends on knowledge collected each from investee firms and from third events to quantify the affect (be it detrimental or optimistic) of its self-proclaimed inexperienced investments. A key knowledge supply is the score company MSCI, which supplies Glencore a median rating for ESG dangers, however a minus for alignment with the Sustainable Improvement Targets.
Within the sustainability disclosure paperwork hooked up to its funds, J.P. Morgan admits that it can not “assure the accuracy, availability or completeness of its proprietary system or third-party knowledge”. And certainly, neither the asset supervisor nor the ESG analysts would have had an opportunity of discovering the Tweefontein mine’s extreme water air pollution had Glencore not taken the initiative to tell them.
Because of flawed due diligence (overlooking unreported instances), J.P. Morgan has thus far reported a optimistic affect for its inexperienced funds, even though buyers have profited from Glencore’s water devastation in South Africa. What’s extra, investor cash has been poured straight into this environmental scourge by the acquisition of the corporate’s company bonds. The truth is, the Swiss mining large’s bond prospectus explicitly lists the principle firm’s mining operations, together with the Tweefontein mine. Which means that the proceeds might be used to finance any of these actions. Glencore’s spokesman refused to make clear how a lot of the proceeds went or could go to the corporate’s South African operations. “Proceeds are used for common company functions,” he stated.
J.P. Morgan’s inexperienced funds are formally dedicated to, amongst different issues, “defending internationally proclaimed human rights and decreasing poisonous emissions”. These mixed claims suggest that firms within the portfolio don’t hamper entry to scrub water, which is recognised as a human proper underneath worldwide legislation, together with by the implementation of water decontamination (5), and is enshrined within the South African structure.
These guarantees are marketed in all of the funds’ sustainability disclosure paperwork, which declare to fulfill their commitments by excluding firms concerned in dangerous actions, together with coal. Nevertheless, J.P. Morgan’s exclusion coverage permits investments in firms that derive lower than 20% of their income from coal manufacturing or distribution. This exemption leaves room for greenwashing. As a J.P. Morgan spokesperson advised Voxeurop: “MSCI ESG Supervisor reveals that Glencore has 9.79% publicity (i.e. to coal)”, making it an ideal “sustainability” candidate.
As well as, the fund’s coverage excludes firms that violate related OECD and UN requirements requiring avoidance of freshwater degradation, mitigation of environmental herm and remediation of native stakeholder grievances (6). Nevertheless, this exclusion is proscribed to firms included within the tiny portion of J.P. Morgan’s funds that qualify as totally ‘sustainable’. In keeping with EU guidelines, this portion can solely embody actions that don’t hurt key environmental goals (based on the Taxonomy Regulation), reminiscent of water safety and air pollution prevention.
The J.P. Morgan spokesperson declined to make clear whether or not this portion, or no less than the broader ESG portion that helps obtain a few of the fund’s goals (environmental and/or social traits), consists of Glencore, which can even be exterior of each. These two subsets of investments characterize no less than 20% and 51% respectively of the 2 funds mislabelled as ESG, whereas they could characterize a smaller or bigger proportion of the opposite funds’ portfolios. Regardless of these minimalist thresholds, J.P. Morgan’s attracts buyers’ consideration by utilizing the interesting phrase “sustainable funding funds” on its advertising and marketing web site.
Nicola Koch, head of the two° Investing Initiative (2DII), an unbiased, non-profit suppose tank working to align monetary markets and regulation with the targets of the Paris Settlement, factors out the irony: the “loopy consequence of the loopholes within the EU laws is that asset managers can theoretically make investments the non-ESG portion of their funds in firms that don’t meet worldwide requirements”.
ESG data-driven ways conceal actuality on the bottom
In an electronic mail to J.P. Morgan’s investor relations division, we talked about Mariette Lifferink’s criticism to Umunna. We requested whether or not Glencore’s misconduct in Mpumalanga merited scrutiny as a possible misalignment with the Inexperienced Fund’s goals, and whether or not it will result in a reassessment of the general sustainability efficiency of the investments and engagement with the mining firm, and even its removing from the portfolio. Thus far we’ve not obtained any clarification.
We all know that J.P. Morgan doesn’t prioritise water air pollution when participating with firms in its inexperienced funds, though it does embody water emissions in its EU-compliant affect indicators. Such indicators are established underneath EU guidelines to measure the progress of funds in the direction of their goals. It’s price noting that for every indicator, J.P. Morgan quantifies the rating by aggregating the affect of all firms included in all managed funds.
Which means that water air pollution can nonetheless present a downward development throughout J.P. Morgan’s inexperienced investments, although particular person firms could fail to scale back water air pollution at particular manufacturing websites. This isn’t to say instances the place an organization doesn’t even disclose its detrimental impacts, reminiscent of Glencore in relation to the Tweefontein mine.
As talked about within the funds’ sustainability disclosure paperwork, J.P. Morgan’s ESG guidelines consists of issuer reviews. The water-related incidents talked about in Glencore’s 2023 Sustainability Report make no reference to the persistent breaches on the Tweefontein mine, leading to over-contamination. The report whitewashes the fact by stating: “We require our industrial operations to […] develop water administration methods to maximise the environment friendly and sustainable use of this necessary pure useful resource […] and shield entry to water for different customers.” The ESG scoreboard talked about within the report provides: “We deal with water previous to discharge in accordance with regulatory approvals, permits and licences”.
In a separate electronic mail, we requested the Glencore spokesperson if the criticism Mariette Lifferink signalled to the Tweefontein mine supervisor (earlier than informing Chuka Umunna) was escalated to the very best company stage to set off investigations and remedial motion, in step with the monitoring mechanism outlined within the firm’s sustainability report and bond prospectus (7). We additionally requested whether or not the controversy had been communicated to each bondholders and shareholders (together with J.P. Morgan’s inexperienced funds). We had been advised that the case was being stored confidential.
We shared our findings on Glencore’s actions in South Africa with J.P. Morgan and requested them to remark. “We decline to remark past what’s within the public area,” stated the corporate’s spokesperson, refusing to reply our questions.
Formally, J.P. Morgan could faux to be unaware of the fact on the bottom.
However their compliance division has been knowledgeable by Lifferink, as has Chuka Umunna.
FOOTNOTES
1) J.P. Morgan ESG-labeled inexperienced funds
World Analysis Enhanced Index Fairness ESG
Europe Analysis Enhanced Index Fairness ESG
2) Native information
https://www.news24.com/citypress/information/emalahleni-is-failing-to-provide-clean-drinking-water-to-500-000-people-20220922
3) Scientific research
https://www.sciencedirect.com/science/article/abs/pii/S1464343X21001552
https://www.sciencedirect.com/science/article/pii/S0075951123000919
https://www.researchgate.web/publication/356086353_Seasonal_characterisation_of_acid_mine_drainage_in_Mpumalanga_coalfields_region
https://repository.nwu.ac.za/bitstream/deal with/10394/33898/Ratombopercent20APpercent2027262006.pdf?sequence=1&isAllowed=y
https://www.sciencedirect.com/science/article/pii/S0925857424002490
https://assets-eu.researchsquare.com/information/rs-1706599/v1/2f6b84c4-cc39-4798-a730-95892477d0d5.pdf?c=1654020419
4) Report of DWS inspection held on October 18, 2021
The mine will not be complying with Nationwide Environmental Administration Waste Act, 2008 (Act 59 of 2008) Nationwide Norms and Requirements of Storage of Waste 29 November 2013
The place of the DWS primarily based on the information is that the mine has contravened the availability of Nationwide Water Act, 1998 and situations of the WUL (Water Use Licence).
Water high quality inside the streams exceeds WUL limits. BOSR-01 have excessive EC, Cl and SO4. WISR-04 have excessive focus of EC, Ca, Mg, Cl, SO4 and low pH. WISR09 have excessive EC, SO4, Ca, Cl, Mg, Ok, Na and Mn.WISR-06 have excessive focus of Cl, Mn and EC.
5)Human Proper to Water
The human proper to protected consuming water was first acknowledged by the UN Common Meeting and the Human Rights Council as a part of binding worldwide legislation in 2010.
6) Pointers for Multinational Enterprises on Accountable Enterprise Conduct
Enterprises must also keep away from and handle […] freshwater degradation
UN World Compact
The important thing to a precautionary strategy, from a enterprise perspective, is the concept of prevention slightly than remediation. In different phrases, it’s cheaper to take early motion to make sure that environmental harm doesn’t happen.
UN Guiding Ideas on Enterprise and Human Rights
Operational-level grievance mechanisms […] are usually administered by enterprises. […] These mechanisms make it attainable for grievances, as soon as recognized, to be addressed and for hostile impacts to be remediated early and straight by the enterprise enterprise, thereby stopping harms from compounding and grievances from escalating.
Grievances are often not framed when it comes to human rights […]. Regardless, the place outcomes have implications for human rights, care must be taken to make sure that they’re in step with internationally acknowledged human rights.
7) Prospectus of the 144A Issuances program and EMTN program
The Group additionally has mechanisms in place to obtain grievances and considerations. The Group aligns its grievance mechanisms with the necessities of the UN Guiding Ideas on Enterprise and Human Rights. Senior operational and departmental administration and the Board’s well being and security, surroundings and communities committee obtain common reviews on grievances and considerations. All grievances and considerations obtained are registered and investigated, and the Group notifies complainants of the outcomes of their grievance
