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Chapter 16: Mini-Case: Unearth Justice AgileAction, an international aid charity, and MAFOD joined forces in 2008, campaigning for investors to intervene in irresponsible mining companies that were uprooting communities and causing environmental devastation in places like Honduras, the Philippines and the Congo

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Chapter 16: Mini-Case: Unearth Justice AgileAction, an international aid charity, and MAFOD joined forces in 2008, campaigning for investors to intervene in irresponsible mining companies that were u... prooting communities and causing environmental devastation in places like Honduras, the Philippines and the Congo. The practices involved raised not only ethical questions but serious business and financial questions also. The boom in commodity prices in early 2008 saw investors rush to buy shares in the extractive sector including mining companies. The price boom meant that mining companies were able to initiate projects in areas previously thought uneconomical because they were too remote, too dangerous or too politically unstable. MAFOD found that many of these mining companies were not carrying out adequate risk assessments of the potential loss-making problems associated with expanding into these areas, including the risks of conflict, community opposition or reputational risk for the company. Irresponsible mining projects that disregard human rights and environmental factors are more likely to be disrupted or shut down, and thus represented a clear financial risk to pension funds. AgileAction and MAFOD sent briefings to over 400 institutional investors worth trillions of pounds, and hundreds of people contacted their pension funds to demand they take action on irresponsible mining companies. This successfully put the issue on the agenda for individual pension funds and investor coalitions including the Universal Authority Pension Fund Forum (UAPFF). Questions: 1. What issues do MAFOD wants to address in this situation? 2. What ethical considerations do AgileAction and MAFOD would like to discuss with the institutional investors? 3. What management risks should institutional investors consider on top of profit making in making huge investments? 4. What are the issues that institutional investors must conform with before investing in the mining industry? 5. What governance principle must mining companies conform with to protect the environment, the people and the community at large? Answered by Expert Tutors 1. Environmental and ethical issues. 2. Irresponsible mining. 3. The shutting down of the mining projects. 4. Ethical issues, environmental issues, community conflicts, political and reputational issues. 5. a) Director's duties, remuneration, and performance. b) Risk governance and internal control. c) Relations with stakeholders and other key stakeholders. [Show More]

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