In the 1980s, thousands of indigenous peasants like Chavez were forced to leave their homes and farms because of Peru’s civil war, coupled with an agricultural crisis and job shortages. Some of these internal refugees set up shop in abandoned mines, or areas where gold had already been discovered. Their equipment was rudimentary and conditions were precarious.

When Chavez began excavating at what is now the Santa Filomena mine, there were no roads and miners had to walk to the site, carrying heavy barrels of water on their backs. They descended 4,000 to 5,000 metres below ground, lugging the heavy mineral up on their backs.

“The search for work turned us into adventurers,” says Chavez with pride. “The physical exertion was tremendous. It was quite a sacrifice.” Even today the majority of Peru’s estimated 30,000 small-scale miners face abusive labour conditions, health problems from handling toxic chemicals and exploitation from gold buyers, bosses and labour traffickers.

But Chavez is now one of the happy exceptions: He belongs to a cooperative of about 900 artisanal miners who have formed their own company, called Sotrami. With help from non-profits, the company has brought in strict environmental, labour and human rights standards. In 2012, thanks to these reforms, Sotrami became Peru’s first mine to earn Fairtrade and Fairmined certification.

Certification allows indigenous miners to use their natural resources in a sustainable manner while earning extra profits on their gold, which are invested in community development projects. And it provides jewellers and consumers with the guarantee that they’re purchasing gold that has been mined with respect for the environment and human rights.

Tarnished past

Gold has come under attack in recent years as the new ivory or baby seal skin – blamed for fuelling a bloody, decades-long war in the Democratic Republic of Congo, for deforesting the Amazon rainforest and for displacing and exploiting indigenous communities around the globe.

Reality is not so black and white. According to Fairtrade International, about 100 million people worldwide earn a living from artisanal and small-scale mining. Although artisanal miners produce only about 10 per cent of the world’s gold each year, they make up about 90 per cent of the workforce in gold mining, providing important financial support for their families.

But large-scale gold mining by transnational corporations has eliminated jobs by using high-tech machinery, depriving local indigenous communities of employment. Profits typically end up in foreign bank accounts, and most supporting services such as equipment repair and hotels are handled by outsiders. Across the globe, indigenous people are demanding the right to control and benefit from their natural resources, including mineral rights.

Some people within the jewelry industry have been listening. Greg Valerio is one of the founders of Fair Jewelry Action and has been calling for certified gold since the mid-1990s. At that time, most industry people said it would be impossible to certify gold because once it is melted down, it’s very hard to know where it originated. “I challenged the jewelry industry,” says Valerio. “They told me: You are mad, go away, you’re wasting your time and you’re wasting your breath.”

Responsible mining

But the stubborn Brit continued his quest. In 2003 he met people from the Oro Verde mine in Colombia. This cooperative, run by local Afro-Colombians in a fragile ecological zone, was producing gold using chemical-free methods passed down by their ancestors, such as panning for gold in riverbeds. Certification didn’t exist yet, but Valerio took a gamble and marketed “green gold” wedding rings from Oro Verde, with instant success.

“The jeweller met the miner and bingo, we proved you can have certification in mining,” says Valerio. “You can trace where your gold came from, and you can turn it into a product and sell it to a customer at a premium.”

The following year, Oro Verde workers, Valerio and other like-minded people, non-profits and miners joined forces to create the Alliance for Responsible Mining (ARM) to develop the world’s first third-party certification for small-scale mining. Fairtrade International joined the initiative and in 2011 certified gold was launched in the U.K. and Canada. Last year, the two certifiers went separate ways, creating two labels: Fairtrade gold and Fairmined gold by ARM.

“It’s been a long process,” says Manuel Reinoso, vice-chair of ARM’s board of directors. The gregarious Peruvian is also an indigenous artisanal miner, with large muscular arms from a lifetime of manual labour.

Small-scale miners like Reinoso have a long history of clashes with the corporate mining industry. Peru’s trade union representing large-scale miners has called on the government to take a hard line against illegal miners who don’t pay taxes and aren’t subject to environmental regulations. In a published editorial, the union accuses illegal miners of “deforestation, pillaging, tax evasion, corruption and quasi-slavery labor tactics.’”

New narrative

But certification changes the narrative. It requires small-scale miners to become legal operators – a step the corporate mining industry applauds. However, Reinoso and others admit that certification is still in its infancy and the majority of artisanal miners around the world still operate outside the law. One of the problems, says Reinoso, is that many national governments have set up bureaucratic obstacles to legalization, with excessive steps and paperwork that most artisanal miners can’t afford to complete.

On the other side of the spectrum, environmental groups have also viewed certification with some criticism. “The efforts to improve the safety performance and wages for small-scale miners are very important and laudable steps in the right direction,” says Payal Sampat of Earthworks, a U.S.-based environmental group. But that doesn’t address environmental risks, says Sampat, who has been calling on certification initiatives to set a firm timeline for phasing out the use of mercury and toxic chemicals by many small-scale mining operations. “The footprint of these mines is going to expand as certification systems become more successful, and some of these are inside protected areas and ecologically sensitive areas.”

Certification currently allows the use of mercury and cyanide, but miners must follow best practices, using the most environmental technology available. Fairtrade has also created a special label called “ecological gold” for mining processes that don’t use chemicals. This gold fetches a higher price for miners.

In Africa, ARM has joined forces with the Artisanal Gold Council, a Vancouver-based non-profit, to set up pilot projects using a chemical-free processing system. Their first training centre is already operating in Burkina Faso on an artisanal mining site of about 3,000 miners.

“The miners are really interested in the technical issues, in improving productivity,” says Yves Bertran Alvarez, ARM’s project manager. “Right now they’re losing a lot of gold through inefficient mining, so it means more gold for them.” He says that earning Fairmined certification will also mean increased profits for the miners, along with improved health and safety conditions.

If the project takes off, this could have major implications for Burkina Faso, a country with 200,000 small-scale miners and up to a million people earning a living from mining-related industries. And ARM is working on similar pilot projects in Senegal and Mali.

Growing pains

But as the fledgling certification movement grows, divisions have also emerged. In 2012, ARM forged an alliance with the Responsible Jewellery Council (RJC), an organization that certifies some of the jewelry and mining industry’s largest corporations, assuring consumers that their products are environmentally and socially responsible.

Over 150 jewellers and citizens signed a letter opposing the partnership, including Valerio, one of ARM’s founders. Many opponents felt that ARM should not join forces with large corporate interests, and that the organization’s strength was in remaining independent, small and community-based.

The RJC has also been tarnished by criticisms from environmental groups. Three of its members – major Swiss gold refineries – have been accused of purchasing illegal gold linked to the civil war in the Democratic Republic of the Congo and deforestation of Peru’s Amazon.

Those in favour of the RJC partnership say it will allow small-scale miners to sell to large refiners, providing them with a bigger market and integrating them into the global mining sector. But the move has led some ethical jewellers, such as Marc Choyt, to bypass ARM’s Fairmined label and go instead with Fairtrade.

Choyt is president of Reflective Images, a designer jewelry company in Santa Fe, New Mexico. He now buys his gold from Sotrami, the cooperative where Chavez works in Peru.

“In our society, people buy jewelry for symbolic, highly emotional reasons, like commitments and marriage,” Choyt says. “But the materials used in these products are resulting in toxic mercury poisoning and destruction of rainforests and indigenous culture. With Fairtrade gold, we’re trying to create a parallel economic model, something different.”

The choice is ultimately up to consumers. A wedding ring can hold the tears of indigenous peoples who have been displaced from their ancestral lands, or it can represent a more hopeful story: the struggle of indigenous miners around the world to rise out of poverty, and the risk taken by ethical jewellers to invest in a sustainable, more responsible world.

The post A golden opportunity appeared first on Corporate Knights.

The challenge is how to be socially responsible while investing in an industry that is not inherently sustainable, will cause at least some degree of contamination – even with the latest environmental technology – and has a track record of human rights violations.

Almost one thousand investment firms representing $25 trillion in assets have signed the UN’s Principles for Responsible Investment, pledging to be “active owners and incorporate environmental, social and corporate governance issues into (their) ownership policies and practices.” They use their leverage as shareholders to try to influence company policy, including calls to defend the rights of local communities affected by oil, mining and gas projects.

This growing chorus of investors and traditional SRIs say they are shareowners, actively using their influence to push companies to improve social and environmental policies. Their stance is both moral and economic: evidence shows that poor environmental and social practices can lead to financial woes, like the $40 billion price tag attached to BP’s oil spill in the Gulf of Mexico.

But do companies really listen to these do-gooder investors? Analysts, non-profits and even company insiders say that although final decisions rest with the majority shareholders (the owners), minority shareholders – even those with relatively few shares – can have an impact. A company’s annual general meeting (AGM) provides an opportunity for responsible investors to file shareholder resolutions, vote on company policy and garner media coverage for their cause.

“Companies prepare for their AGMs months in advance and they know if a shareholder resolution is in the works,” said one oil and gas insider. To avoid the spotlight, he said, “they’ll do everything they can in advance to resolve problems.”

Private talks, phone calls and letters are more appealing to company executives who are intent on minimizing scandal. Shareholder resolutions, on the other hand, are public. If passed, the company is obliged to execute them and report on progress. Since most SRI firms hold less than 1 per cent of a company’s shares, it’s rare for their resolutions to obtain a majority vote. But a tally of 20 per cent will capture media attention and might put enough pressure on a company to address some of the issues raised.

To gain more votes, SRIs need to win over more mainstream investors. An analysis by Corporate Knights, using data from the environmental-investor group CERES Resolution Tracker, shows that SRIs are making an impact. About three-quarters of environmental and social resolutions tracked by CERES received either 20 per cent of shareholder votes or the matter was resolved in advance. The list included several oil, mining and gas companies. Issues ranged from water pollution and worker safety at Marathon Oil to climate change and emission reductions at Occidental Petroleum and Exxon Mobil.

A new study published last year by U.S. and U.K. academics shows that activism by shareholders (known as ‘engagement’) also makes financial sense. The study, which won a prize from the University of Berkeley, examined 2,152 engagements by shareholders over a 10-year period and found that successful activities led to higher shareholder returns.

But even when a resolution is passed, implementation can be difficult, as illustrated by the famous Newmont gold mining case. In 2007, a group of about 15 Christian investors filed a resolution at the gold giant’s annual meeting in Colorado. The document called for an independent review of Newmont’s poor handling of conflicts with local communities at its mines around the globe. Oddly, the resolution passed with over 95 per cent support, meaning the company itself actually voted in favour. This marked the first time a U.S. mining company had endorsed a social resolution at its own AGM.

Rev. Seamus Finn of the Missionary Oblates of Mary Immaculate, one of the resolution’s supporters, says Newmont’s support remains a mystery. “It may have been they saw the writing on the wall.”

At the time, Newmont was under fire for its treatment of local communities in Peru, Ghana, Indonesia and the U.S., and had even faced legal action for environmental contamination at a few of its mines. Despite the surrounding controversy, the resolution was heralded as a victory for SRIs.

The resulting independent review, published in 2009, was surprisingly critical of the company and included a hefty list of recommendations. In a move some consider groundbreaking, Newmont created an independent advisory panel to help implement the report that included Christian Brothers Investment Services, the leading proponent of the resolution, and long-time critics of the company like Oxfam and Earthworks.

“We felt the report could have an impact on the industry,” says Julie Tanner, assistant director of SRI at Christian Brothers. “It was one of the first in the mining industry that was so extensive and with the clear goal of trying to develop recommendations for change.”

But three years later, Tanner admits it’s been “difficult” to get information on the company’s implementation of the report. Activists put it more bluntly, saying that recent violence at Newmont’s mine proves the company has failed to follow through on the recommendations.

In 2012, Newmont was forced to suspend a $4.8 billion expansion project at its Yanacocha mine in Peru after massive protests supported by the regional government resulted in five civilian deaths. The Minas Conga gold project would have been Newmont’s largest mine to date, but locals say it would destroy four sacred lakes, the source of water for an entire farming region.

Every day of delay from protests was costing Newmont shareholders an estimated $2 million, illustrating the danger of pushing ahead with a project without first obtaining local consent. But Newmont insists that Conga isn’t completely dead. It has announced plans to build water reservoirs on the site, sparking accusations that the company is creeping ahead with plans to build the mine despite local opposition.

Newmont’s responsible investors now face some tough decisions. If they divest, they lose their opportunity to hold Newmont accountable. But if they stay, they risk being used to prop up the company’s already tarnished image. Having SRI firms on board is like being awarded a certificate of “good conduct” and Newmont’s handling of the Conga crisis hardly deserves a medal.

The case highlights another challenge for responsible investors: the issue of local consent. It’s not hard to ask a company to put more women on the board of directors or to use cleaner technologies. But what if the local community’s wishes go against shareholders’ interests? What if the community quite simply wants the company to go away?

These tough questions were put to the test when a group of responsible investors, including Ethical Funds, part of NEI, filed a shareholder resolution in 2008 asking Vancouver-based Goldcorp to conduct a human rights impact review at its Guatemalan mine. Before the resolution came up for voting, the company agreed to conduct the review and the resolution was withdrawn. A year later, the Public Service Alliance of Canada, one of the resolution’s signatories, withdrew its involvement in the review process because community leaders said they were not consulted about the resolution. They also accused Goldcorp of manipulating the review process.

That the SRIs neglected to obtain support from locals before taking action on their behalf highlights what activists consider a conflict of interest. “SRI firms might be supporting best practices, but at the end of the day they earn money from the company,” said Camilo Leon, who has worked on corporate social responsibility for mining firms, non-profits and the government in Peru. “If there’s no mining project, there’s no money.”

Can investors overcome this conflict of interest? There’s the encouraging case of Vedanta Resources, a British-based natural resources company that tried to develop a bauxite mine in India’s Orissa state despite opposition from the local indigenous group. The 9,000-member Dongria Kondh survive on hunting and gathering and said the project would destroy their water resources and livelihood.

In 2007 Norway’s sovereign wealth fund divested its holdings of Vedanta, accusing the company of environmental damage and complicity in human rights violations. Three years later several other high-profile investors divested, including the Church of England, Marlborough Ethical Fund and the Dutch pension giant PGGM. India’s government responded by rejecting Vedanta’s plans, causing the company’s shares to plummet.

The SRIs that divested not only made a strong moral statement, they also spared themselves the resulting losses from Vedanta’s falling share prices.

Examples like Vedanta, where shareholders divest from billion-dollar projects that lack a social license, are few, however. The majority of SRIs have a more subtle impact on oil, gas and mining industries, leveraging their clout to advance social and environmental policy and more efficient use of natural resources. In the process, they must navigate tricky waters to ensure they don’t harm local struggles or become good publicity for companies with damaged reputations.

The challenges are great, but the alternative is to leave investment in this sector to the sharks: those who believe “social” means a good cocktail party and “responsible investing” is about getting the highest return for clients, without caring how that money is earned.

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