Alliance Notes : Webinar on Battery Minerals and the Democratic Republic of the Congo, Brazilian oil giant Petrobras hosts its first ever climate-focused webinar, Deforestation Risk in the Brazilian Soy Supply Chain

Monday, July 13, 2020

                              Alliance Notes, 7/13/20


Announcements and Upcoming Events


Monday, July 13 at 11am EDT: Webinar on Battery Minerals and the Democratic Republic of the Congo. The evolution of our global energy and transportation mix—including the rise of renewables and the growth of the electric vehicle fleet—is driving a major transformation in the global mining industry. Expected shifts in demand towards resources that support these changes are driving a new set of ESG issues that investors need to be aware of.  In particular, the minerals related to battery storage—cobalt, lithium and graphite—bring a number of challenges due to their geographic location and physical characteristics, as well as allegations of various types of corruption.  In the coming months, the Alliance extractive industries working group will examine a series of issues related to this energy transition.  

We are kicking this series off later today (11am EDT) with a presentation on battery minerals and the supply chain from Erica Westenberg and Kaisa Toroskainen of the Natural Resource Governance Institute (NRGI). NRGI's Resource Governance Index is a measure of governance of a country’s extractive industries. Erica and Kaisa will discuss findings from two forthcoming NRGI reports with relevance to the energy transition:

1) a report on policy and governance solutions to build a sustainable electric vehicle battery supply chain (authored jointly with the Berkeley Center for Law, Energy & Environment); and

2) a new assessment of the Democratic Republic of the Congo's governance of its extractive sectors

The DRC is the world's leading source of cobalt (accounting for 60% of global? production in 2018) and, in 2017, DRC’s mining sector ranked 75th out of 89 countries in DRC’s governance index. But the country revised its mining code in 2018 and has seen some improvements in its governance framework. Erica and Kaisa will discuss how investors should think about DRC's recent progress in good governance and transparency, and remaining and emerging challenges. —Andrew Howell


PBR Webinar

Wednesday, July 15 at 11am EDT: Brazilian oil giant Petrobras will host its first ever climate-focused webinar (register here), in an event co-hosted by the Alliance. The impetus for this event is Petrobras’ recent announcement in support of the Task Force on Climate-related Financial Disclosures (TCFD) and its recommendations. 

The TCFD is an initiative by the Financial Stability Board of the G20 group with the mission of developing recommendations on disclosing data on greenhouse gas emissions as well as, more broadly, financial risks related to climate change. Since the first TCFD recommendations were released in 2017, over 1000 corporations have joined the ranks of supporters of this framework. Although initially this came primarily from developed economies, recent months have seen an increase in participation from the emerging markets, including Petrobras.

Petrobras is also a member of the Oil and Gas Climate Initiative (OGCI) made up of 12 major global energy groups and was a signatory to the recent Open Letter from OGCI arguing for a renewed commitment to accelerate the transition to a low carbon future in the face of the Covid-19 pandemic. In its recently-updated Climate Change Supplement, the company put forward six climate-related targets, including zero growth in absolute emissions from 2015 to 2025, a 32% reduction in carbon intensity over that period, and zero routine flaring by 2030.  On this week’s webinar, we hope to hear details of how Petrobras plans to implement these and other commitments in a challenging time for the industry. - Andrew Howell

New Report: Soy and Deforestation

Soy and Deforestation

The Alliance has published a research brief on Deforestation Risk in the Brazilian Soy Supply Chain, in collaboration with its policy partner, ProForest. This brief was prepared to help investors understand, identify, and address Brazilian soy-related deforestation risks in their portfolios. Decades of growth in the livestock industry – where 75% of soy produced globally is used as feedstock – has driven a big expansion in soy production, much of it in South America, where parts of the land cultivation has expanded into forests, savannahs and grasslands. Soybean farming is considered by the World Wildlife Fund to be the second largest driver of deforestation globally, after beef production. 

Companies in the soy supply chain are exposed to reputational, market, regulatory and operational risks stemming from the adverse environmental and social impacts of deforestation-linked soy. Furthermore, many downstream companies have zero-deforestation and conversion-free supply chain commitments that go beyond the minimum legal requirements set by the Brazil forest code. This exposes upstream companies to further market risk.

Given the ubiquitous nature of soy as an ingredient in the food supply chain, investors can be exposed to these risks not only through their holdings of grain producers and traders, but also through animal protein producers, food manufacturers, supermarkets and restaurant chains. Therefore, they should ensure best practices to manage these risks are being adopted across their portfolio companies.

In addition to mapping out the various issues related to soy production, the report offers a primer on Brazil’s complex forest code and an overview of various agreements and initiatives related to the soy sector. We also put forward several questions that investors should be asking companies exposed to soy, with respect to exposure, policy commitments, sourcing procedures, and disclosure.  — Nadine Cavusoglu and Andrew Howell 

The Emerging Markets Investors Alliance is a 501(c)(3) non-profit organization that enables institutional emerging market investors to support good governance, promote sustainable development, and improve investment performance in the                                                                                                  governments and companies in which they invest.