Swedish state pension buffer fund AP1 has begun selling SEK407m (€38.6m) worth of equities and bonds of Brazilian mining company Vale, after the AP Funds’ Council on Ethics recommended the exclusion the company from the AP funds’ portfolios.
The recommendation follows the fatal collapse of a tailings dam at one of its mining facilities in Brumadinho, Brazil, last month.
The council said it was recommending AP1, AP2, AP3 and AP4 exclude Vale because the council had lost confidence in the firm, adding that it could be linked to violations of three major international conventions.
In a statement, the council said: “It would appear that the company did not act sufficiently quickly on reported deficiencies regarding the safety of the tailings dam in Corrego do Feijao.
“The consequences of the company’s actions have had devastating and tragic consequences… for the local population, company employees and the environment around Corrego do Feijao.”
A spokesman for AP1 told IPE that the pension fund had SEK350m invested in Vale shares and SEK57m in the company’s bonds, according to figures for the end of June last year.
“We have now initiated a total exclusion of those equities and bonds,” he said.
Meanwhile, AP2 and AP4 said they had no holdings in the company, and AP3 said it had only had a small exposure to a fund that had invested in Vale.
AP4 and AP3 said they had decided to follow the Council on Ethics’ recommendation to exclude Vale. A spokeswoman for AP2 said that when the fund switched to its internally-developed ESG indices for global equities last year, the Brazilian company had not been included.
BHP pledges to improve tailing dam security
At the start of this month, institutional investors led by the Church of England called for a global independent public classification system to monitor the safety risk of tailings dams, in the wake of the Brumadinho collapse that killed more than 100 people.
In a statement published on 19 February, fellow mining company BHP Billiton said it planned to meet investors and other interested bodies later this month to help speed up its work to improve the safety of its own dams. It also voiced support for an independent oversight body.
The company said: “BHP will continue to accelerate its work with the industry to advance the science and technology required to improve the safety of tailings storage facilities.
“This includes existing workstreams such as early warning technologies, better models and monitoring of possible modes of failure, tailings dewatering options, and dry tailings storage viability at scale.”
John Howchin, secretary general of the AP funds’ ethics council, said: “I am very pleased to see BHP take leadership on this issue. We now need that leadership across the rest of the sector.”
The AP funds, the Church of England’s investment bodies and other investors running a combined £3trn (€3.5trn) also welcomed BHP’s move.
Adam Matthews, director of ethics and engagement for the Church of England Pensions Board, said: “Communities, workers, banks and investors need the assurance that best practice will become the new minimum requirement across the mining sector.
“Independence and transparency will be key to re-establishing trust and as investors we look forward to playing our part in working with global experts and industry in advancing the call we have made.”
Investors will meet in April with industry experts and company representatives to discuss the demands for greater safety.