GLOBAL  - A resolution, proposed by European and American pension funds, to appoint an independent environmental expert to the board of mining company Freeport McMoRan has received the support of 32.5% of shareholders.

At the annual general meeting (AGM) of Freeport McMoRan, held on 11 June, a resolution was filed by Stichting Pensioenfonds ABP, AP1, AP2, AP3 and AP4, and the New York City Pension Funds, to appoint a new director with environmental expertise, to "restore trust in the company and minimise the adverse environmental impact of its operations".

The pension funds, which between them own 2.1 million shares in Freeport, said the mining company has been the subject of intense scrutiny over environmental and social issues at its mine in Grasberg - one of three mines in the world that disposes of tailings directly into a river.

Its alleged environmental breaches led to the company becoming one of the first exclusions from the Norwegian Government Pension Fund - Global's investment universe in February 2006, while it is also one of 13 companies on the Ethical Council for the Swedish AP- buffer funds 'focus list'. (See earlier IPE articles: AP Ethical Council targets 13 investments and Norway excludes Rio Tinto over environmental damage)

The proposal put forward by the pension schemes pointed out Freeport does not have an independent director with environmental expertise and designated responsibility for environmental matters, whereas other mining companies such as BHP Billiton and Rio Tinto do.

In a statement to the AGM last week, Rob Lake, representing ABP as the asset manager's head of sustainability, said the pension schemes view the "persistent criticism of the company on these issues as damaging to our interests as shareholders" and suggested it gives rise to a risk the company could face increased costs, could lead to a risk that the company obstacles to business development along with negative media and public attention.

The pension funds therefore proposed that "at least one candidate" should be elected to the board as an independent director with a "high level of expertise in environmental matters relevant to mining and with high standing in the business community", as this would place Freeport "at the forefront of board-level practice on environmental and social issues in the mining industry".

Despite Freeport's opposition to the proposal, in which it claimed it "does not believe it is in our shareholders' best interests to require a particular type of specialist on our board", the resolution was supported by 32.5% of shareholders.

Lake said: "This percentage is a very strong signal to the Board of Freeport MacMoRan, which they cannot ignore. A percentage of more than 5% for these kinds of resolutions is very unusual."

That said, he pointed out that the resolution was "advisory", so it makes no difference if it was passed or not, but added APG - the investment arm of the Dutch ABP pension fund - had a discussion with Freeport's CEO after the AGM and "is going to have further discussions with Freeport to talk about the profile of the required independent environmental expert".

Christina Hillesöy, chairman of the Ethical Council for the Swedish buffer funds - AP1-4 - added the support for the resolution "shows there are many investors who believe that environmental issues are important and significant for the mining industry".

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