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By Stephen Lee
The world’s largest investment manager is holding onto its stake in a company that’s propping up a proposed copper and gold mine in Alaska, despite pressure to divest.
An environmental group, the Natural Resources Defense Council, says BlackRock Inc.'s $600 million of First Quantum Minerals stock runs afoul of a recent letter by BlackRock Chairman and CEO Laurence Fink, who wrote that CEOs must “understand the societal impact” of their businesses and the ways that trends, including climate change, affect potential for growth.
First Quantum threw the Pebble Mine a lifeline last December when it agreed to invest $150 million over four years.
The deal gives First Quantum an option to pay $1.5 billion if the mine is permitted, in exchange for a 50 percent ownership stake in the mine, which would be built near the world’s largest wild salmon fishery in Bristol Bay.
First Quantum has only an arm’s length relationship to the Pebble Mine, and therefore, Fink’s message does not present a contradiction, Brian Beades, a BlackRock spokesman, said.
“As this point in time, First Quantum does not own Pebble Mine,” Beades told Bloomberg Environment. “They might have an ownership stake in two years or more, but they don’t today. It’s not at a point where anything has happened that would lead BlackRock to, one way or the other, take a formal position on a transaction that hasn’t been consummated yet.”
Moreover, roughly half of BlackRock’s 43.6 million First Quantum shares are passively managed through index funds, Beades said.
First Quantum didn’t respond to an interview request.
BlackRock holds 6.3 percent of First Quantum’s outstanding shares, making it the company’s third-biggest shareholder.
BlackRock is the second institutional investor to publicly back Pebble. Last month, Van Eck Associates Corp. told Bloomberg Environment that it wasn’t worried about the mine’s environmental impact, because it won’t be permitted unless it passes tough reviews.
Pressure has been mounting on First Quantum to back out of the Pebble project. In the past two months, the California state treasurer, New York state comptroller, and New York City comptroller have called on the Vancouver, British Columbia-based mining company to rethink its investment, citing environmental concerns.
BlackRock’s continued investment in First Quantum means it “is now tacitly endorsing Pebble,” Taryn Kiekow Heimer, who directs a campaign at the Natural Resources Defense Council opposing the Pebble Mine, said.
“Even if First Quantum ultimately decides against a partnership, its immediate influx of cash has served as a financial lifeline that enabled and emboldened Pebble to apply for permits,” she said.
BlackRock contradicted the spirit of its chairman and CEO’s letter, Heimer added.
But Beades said the Fink letter has been misinterpreted.
“It’s saying, ‘For you, as a CEO, expectations have changed. As governments have retreated or failed people’s expectations, you need to be prepared, because society will look to you in the private sector in a way they have not before,’” Beades said. “Individually or collectively, stakeholders have the ability to hurt the value of an organization, and, in turn, the value of our clients’ assets.”
Earlier this month, BlackRock published a list of questions for gun makers and sellers to help it decide whether to continue investing.
The question of what constitutes ethical investing is a nuanced one, according to George Serafeim, a professor at Harvard Business School.
“When do you draw the line? Would you invest in PepsiCo because many of their products are having an adverse impact on obesity and diabetes, or automobile manufacturers that are having a major impact on pollution?” Serafeim told Bloomberg Environment. “In some sense, all companies are having positive and negative impacts. From an investor’s perspective, what is important is to conduct the research in order to measure and analyze those impacts.”
Some Pebble supporters have argued that, because the mine would produce copper, and copper is used to make electric cars, its effect on the environment would be a net positive.
But Andrew Hoffman, a professor at the University of Michigan’s Ross School of Business, said BlackRock’s continued investment in First Quantum “does seem to be a contradiction” with the Fink letter.
“They used to be much more viewed as the Darth Vader of investing, just taking over the market, and they seem to be adopting much more progressive stands on social and environmental issues,” Hoffman told Bloomberg Environment. “It will be a challenge for them to hold onto this mine and still say, ‘But we stand for companies that stand for purpose and social responsibility.’”
The Army Corps of Engineers recently announced a 30-day scoping period for an environmental impact statement beginning April 1, along with four public meetings in Alaska. In this period, a federal agency and the public work together to define the range of issues and possible alternatives to be addressed in an environmental impact statement.
On March 29, the state of Alaska and Speaker of the Alaska House Bryce Edgmon (D) formally requested that the scoping period be extended to 90 and 120 days, respectively.
Joel Reynolds, western director and a senior attorney at the Natural Resources Defense Council, called the 30-day schedule “an outrageous schedule for scoping.”
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