Investors representing more than $450 billion of the world’s assets released a statement today expressing their support for the "Conflict Minerals" final rule, Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, according to the Responsible Sourcing Network (RSN). The statement comes exactly a year before companies will have to send the U.S. Securities and Exchange Commission (SEC) their first Conflict Minerals Reports.
Issued by the SEC last August, Rule 1502 details how corporations must report on their use of "conflict minerals" from eastern Democratic Republic of the Congo (DRC), where a violent conflict has been raging for over 14 years, claiming more than five million lives. The four conflict minerals — tin, tantalum, tungsten, and gold — are used in large quantities in electronics components, jewelry, automobiles and many other manufactured products.
The statement expresses disagreement from 56 sustainable, socially responsible and faith-based investment groups to the lawsuit filed by the U.S. Chamber of Commerce, the National Association of Manufacturers and the Business Roundtable. These investors commend the SEC commissioners and staff for appropriately considering the costs and benefits involved with its implementation before finalizing and passing this rule.
"After conducting hundreds of meetings and reviewing thousands of documents, we are pleased the SEC issued a rule that is practical in its implementation yet requires an appropriate level of transparency and accountability to help cut off mineral revenues from the armed groups in the Congo," said RSN director Patricia Jurewicz.
The statement outlines the importance of protecting investors through improved public disclosure and reporting on social risk factors such as abusive labor practices and human rights impacts. Requiring disclosure of information within a company’s supply chain allows investors to evaluate supply chain policies and practices, to make company-to-company comparisons, to calculate the level of risk associated with conflict mineral sourcing, and to provide assurance that companies are not engaging in destabilizing activities.
"The legislation highlights a material issue for investors, which is beneficial since it promotes transparency in the most vulnerable areas of a company’s supply chain. We also believe that any stay in implementing this unprecedented legislation would hinder a much-needed leverage point to address a main driver of the ongoing violence in the DRC," said Lauren Compere, managing director at Boston Common Asset Management, LLC.
The investor group submitted several recommendations to the SEC during the rule-making process. Key components from the investors’ letters were included in the final rule. Read the recommendations to the SEC and a list of the investor organizations that signed on to the letters here.
David Schilling, Senior Program Director of Human Rights and Resources at the Interfaith Center on Corporate Responsibility, commented, "Leading companies have already begun to implement internal procedures to fully comply with the law, which demonstrates its feasibility of implementation. We commend these companies and encourage all companies to start practicing enhanced supply chain disclosure since it is critical for investors and essential to address the egregious human rights abuses buried in corporate supply chains."
"The 1502 final rule provides sustainable and responsible investors, including investment managers, advisory firms, mutual fund companies, financial planners and asset owners, with information they need to assess how companies are addressing human rights-related risks when making investment decisions," stated Lisa Woll, CEO of US SIF.
Rule 1502 has benefited from overwhelming support from impact investors since the SEC announced it last fall. The investors behind this week’s statement will continue to support the rule as it currently stands against any current or future lawsuits or challenges.
Earlier this week, RSN released its newest report, To the Spinner, which aimed at helping brands and businesses utilize traceability and transparency to eliminate problems from their value chain, particularly around forced and child labor in the cotton fields of Uzbekistan.