Alliance Notes:Tailings / Nigeria & Kenya / Suppliers / Blackrock on ESG / Arcos Dorados

Monday, October 12, 2020

 

                          Alliance Events, 10/12/20

 

Announcements

We were deeply saddened to hear the news of the passing of our dear friend Maruf Siddiquee. Maruf was a member of our Agriculture Working Group, and he actively helped us to expand our network of industry supporters. From the moment we met Maruf, we were inspired by his boundless energy and are grateful for his enthusiasm in advancing our mission. Maruf's spirit will continue to inspire us for many years to come. We send our deepest condolences to his family and his many friends within our emerging markets community.

New Research

 

Issue Brief on Tailings

Issue Brief on Tailings

The Alliance has published an Issue Brief on Tailings Management in the extractive industries. This is the latest in a series looking into sustainability issues in the corporate sector relevant for emerging markets investors and follows our Brief on Community Consent published last month. 

Major tailings accidents in recent years such as at Samarco and Brumadinho in Brazil have awoken investors to risks posed by the long-term storage of mining waste. With an estimated 3500 tailings storage facilities worldwide, and more being built every year, accidents are likely to continue. We provide a primer on tailings risk in emerging markets, discuss the new Global Industry Standard on Tailings Management and assess the new Global Tailings Portal dataset as well as the Responsible Mining Index to identify which countries and companies have the greatest exposure to tailings risk. Chile, Russia, South Africa, Peru, Brazil, and Poland are the most exposed EM countries to tailings. Top exposed EM stocks are Vale, Anglogold Ashanti, Evraz, Severstal, Sibanye-Stillwater, Phosagro, Antofagasta, and KGHM. We suggest ways investors can assess tailings risk in their portfolios and questions to ask management when engaging on this issue. Access the full Issue Brief here.

 

Fiscal Governance Briefs on Nigeria and Kenya

The Alliance has published a Fiscal Governance Brief on Nigeria. Fiscal Governance Briefs take stock of a country’s fiscal transparency and public financial management. We begin at the central government level, then proceed to other parts of the public sector, including natural resource state-owned companies. All readers have access to the front page of the report. To access the entire report readers will need to become Alliance members. Please click here to request membership information.

In recent years, Nigeria has undertaken significant reforms to improve transparency and reduce corruption. However, of fourteen commitments made in the 2017 National Action Plan, none was deemed completed by the OGP in 2020. Nigeria lacks a fiscal transparency code specifying roles for ministries or other stakeholders in budget drafting. Many budget documents are released infrequently, late, or with incomplete information. Issues of transparency and corruption in government budgeting rank high among the concerns of Nigeria’s population, particularly with regards to the petroleum sector. Existing regulations are laden with ambiguities and contradictions that have blurred the roles and responsibilities of various agencies. The extractives sector is characterized by a lack of clarity in oversight structures, overlapping roles and responsibilities, leading to data discrepancies and a lack of accountability.

The Alliance has also published a Fiscal Governance Brief on Kenya. In recent years, Kenya has also made significant progress in improving its fiscal disclosure. In 2012, a new Public Financial Management Law was enacted, aligning Kenya's legal framework with the IMF's best practice standards. This was followed in 2013 with a review of autonomous agencies and state enterprises with the intention of boosting oversight. Since then, the timeliness of annual reports and coverage across institutions has increased. The track record of fiscal forecasting and budgeting is strong. On the other hand, fiscal risk management -- particularly quantitative stress-testing -- shows mixed results. One area that could also show improvement is in the transition to accrual accounting.

Upcoming Events

 

Extractives Call: Digging into Supply Chains

Extractives Call: Digging into Supply Chains

Source: NRGI

A lot of the work of pulling resources from the earth is performed not by the mining/energy firms that operate mines or oil fields, but by their suppliers. And yet for investors, the ESG performance of those suppliers, which are often private, locally-based firms, can be particularly difficult to evaluate. On Thursday, 15 October at 10am EDT our Extractive Industries Working Group welcomes Rob Pitman of the Natural Resources Governance Institute (NRGI) to speak about the challenges of piercing the veil of the supply chain, discussed in a new report, Beneath the Surface: The Case for Oversight of Extractive Industry Suppliers. Rob will provide an overview of the range of governance issues related to the supply chain that investors should be aware of, as well as some practical examples of supplier-related issues in EM (think Naftogaz, "Lava Jato" and the infamous Nigerian Oil and Gas Industry Content Development Act) and some tips for investors to gain a better understanding of supplier risk. The webinar is open to all: please register here.    

 

ESG Initiative Call with Jean-Marc Routier of Blackrock

This Tuesday, October 13 at 9am New York time, 2pm London time, we will hold our next ESG Initiative call. To register for the call, please do so here. Jean-Marc Routier will present BlackRock’s approach to sustainable investing in emerging markets. The ESG Initiative engages global and local institutional asset managers to discuss their approach to integrating ESG factors into their investment frameworks. Asset managers also discuss how they advocate for particular outcomes or best practices with the governments or companies in which they invest.

 

Alliance ESG Conference in December: Save the Date!

Here is an early announcement for the Alliance’s 4th annual EM ESG Conference, which goes virtual December 9-10 2020, with host AllianceBernstein and sponsor JP Morgan.  The Alliance welcomes investors, issuers and policy experts to the only conference exclusively focused on ESG in emerging markets.  Day 1 consists of panels and discussions between policy experts, issuers and investors on top ESG themes dominating investment decisions today.  For Day 2 we will have small group meetings between investors and corporates focused exclusively on ESG issues as well as fireside chats on EM ESG topics. Registration details to follow. 

Recaps of Recent Events

 

Sustainability under the Golden Arches

Source: Arcos Dorados

On Friday October 9th, the Agriculture Working Group hosted a panel from Arcos Dorados Holdings, the Argentine company that owns the franchise for McDonald’s in Latin America and the Caribbean. The panelists were Gabriel Serber (Director of Social Impact and Sustainable Development), Leonardo Lima (Director of Social Impact and Sustainable Development-Brazil), and Dan Schleiniger (Vice President of Investor Relations). 

Arcos Dorados is Latin America’s largest restaurant chain with over 2,000 McDonald’s locations, nearly half of which are in Brazil. The main focus of this presentation was their ESG platform,“Receta del Futuro” or “Recipe for the Future.” This program has five prongs: sustainable sourcing, climate change, packaging and recycling, youth opportunity, and commitment to families. Most relevant to our working group was their discussion about sourcing especially as it relates to beef. Unlike other food products, there is no standard certification process for beef, so Arcos Dorados has to be intentional about what suppliers they use. This discussion tied in well with last month’s call as it relates to questions about indirect suppliers when talking about eliminating deforestation from the cattle supply chain. 

      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.

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