Investors press Canada over oil, gas, mining transparency laws

by Luke Balleny | | Thomson Reuters Foundation
Thursday, 29 August 2013 14:13 GMT

Capstone Mining Corporation's Minto Mine is pictured in Minto, Yukon in Canada. August 21, 2012, REUTERS/Chris Wattie

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Big international investors throw their weight behind the push for global transparency laws for the extractive industries, urging Canada to join the USA and the EU in enacting legislation on the subject

LONDON (Thomson Reuters Foundation) – A group of international investors with $5.8 trillion under management has written to the Canadian government urging it to enact extractive transparency laws like those recently passed in Europe and the United States.

Transparency campaigners and a number of Western governments have pushed for greater transparency in the extractive sector so that citizens of resource-rich countries can better hold both their governments and extractive companies to account.

Canadian Prime Minister Stephen Harper pledged in June to push forward mandatory reporting requirements for the Canadian oil, gas and mining industry that would force the companies to publish the payments they make to governments around the world. Canada has one of the world’s largest extractive sectors in developing countries.

About 3.5 billion people live in countries with extensive oil, gas or mineral reserves, but poor governance and corruption mean many of them do not benefit from the wealth created by their extraction.

“From an investor perspective, the key is reducing risk – operating risk for oil, gas and mining companies who face potential unrest – even violence – from a populace that sees little benefit from its mineral wealth; commercial risk from the threat of contracts being torn up on the back of resource nationalism; and market risk from volatility in commodities prices, which is exacerbated by social unrest,” Frank Curtiss, head of corporate governance at RPMI Railpen Investments said in a statement.

“The less mystery there is behind these resource deals, the fewer unpleasant surprises we can expect,” he added.

The 32 investment institutions which have signed the letter to Canada’s natural resource ministry include Allianz Global Investors, UBS Global Asset Management and a number of Swedish National Pension Funds.

Canadian mining companies, working in conjunction with Canadian transparency activists, have already reached a draft agreement to disclose what they pay to governments.  The draft agreement, struck by the Mining Association of Canada (MAC) and the Prospectors and Developers Association of Canada with Revenue Watch and Publish What You Pay Canada, was released in June and is open for public comment. It covers issues such as the size of a mining project that must be disclosed and how the payment information will be released.

MAC and PDAC’s boards plan to vote on the final measure in November. These industry groups represent big names in the industry, including Barrick Gold, Shell Canada Energy, Vale and Xstrata, as well as thousands of small private companies.

 “This move by Canada is critical for achieving a consistent global transparency standard,” Arne Lööw, head of corporate governance at AP4, The Fourth Swedish National Pension Fund, said in a statement. 

“As one of the world’s top listing venues for mining stocks, it needs to take its rightful place at the top table by setting a meaningful standard in line with the US and EU.  We don’t want companies evading tough standards by shopping around for the weakest forum and picking Canada,” he added. 

“The fact is that Canada’s own mining industry leaders have broken the mould by calling for this: they are the first to recognise the value to industry of transparent business practice, and we agree,” Lööw said.

Resource development accounts for close to 20 percent of Canada's gross domestic product and mining specifically accounts for about 10 percent of Canada’s foreign investment, much of it flowing to development work in Latin America, Africa and Asia.

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