Norwegian municipal pensions giant KLP has said that although Chinese companies are mining key materials for the green transition, there are major hurdles for asset owners when it comes to engaging with them over responsible practice.
The NOK948.1bn (€79.4bn) Oslo-based firm said two of its responsible investments staff flew to China to attend a conference in Chengdu in September in an attempt to make direct contact with mining firms, but were unable to visit a mine as hoped.
Arild Skedsmo, senior analyst, responsible investments at the KLP’s asset management arm, said: “China is a very important country in the world economy, but there are also major challenges in being a responsible owner in the country.”
“The websites of the companies are usually in Chinese and they are also not used to engaging in dialogue with investors,” he said, citing the mineral industry as a difficult area, with extraction and processing of minerals associated with a high risk of violations of workers’ rights, child labour and major environmental damage.
Skedsmo said technology for electric cars and wind turbines required such materials as dysprosium, neodymium, lithium and cobalt, which often had to be sourced from China, which covers more than 80% of the global need for rare minerals for use in electronics.
Skedsmo cited China Northern Rare Earth Group High-Tech Company as a firm in KLP’s portfolio that was hard to engage with.
The company operates in Baotou in Inner Mongolia, an area suffering from extreme environmental damage, and the firm accounts for around 40% of China’s rare earth production, according to KLP.
“They go to great lengths to avoid responding to inquiries from troublesome investors such as KLP, and any desire to visit facilities or meet a representative of the company is categorically rejected,” KLP said in the commentary.
Kiran Aziz, head of responsible investments at KLP, said she and Skedsmo attended the Sustainable Mineral Supply Chain International Forum 2023 (SMISC Forum) in Chengdu, hoping it would lead to more than sending unanswered emails.
The conference agenda showed issues such as human and labour rights as well as climate and nature damage were not problematic as discussion topics, she said, but admitted to being disappointed that KLP’s attempts to visit a mine when in China were “misunderstood” in translation.
“We understand that many companies have a history of mines that are not necessarily in line with today’s expectations, and are more concerned with what the companies are doing to improve practice,” she said.
“If they do not take their responsibility, the consequence may be that we have to exclude the companies,” Aziz said.
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