All That Glitters

Recalling the acrimony that surrounded Wal-Mart’s push into our community a few years ago, I wonder how the citizens of the Comox Valley would respond if a major multinational corporation were to come up with a proposal so controversial that it would dwarf the local Wal-Mart debate by comparison. A proposal that would create thousands of highly paid new jobs and attract a slew of support businesses to the valley region. But one that would have grave concerns surrounding the environmental and social impact on our community. Can you imagine the rancour and spittle that would fly with the announcement of a major gold mining development beside the Comox Glacier? Fortunately such a proposal would not involve the actual use of slave labour, as it did under Roman, Egyptian, Indian, Phoenician and other empires of history, but the mining of gold from a site located beside the primary watershed of the Comox Valley would clearly have an extraordinary impact on life as we know it in this region.

So you can perhaps picture the controversy brewing around the Pascua Lama project, Barrick Gold’s (ABX-TSX) proposal to mine over 18 million ounces of gold, representing nearly 20% of their proven and probable reserves, from a site adjacent to two glaciers straddling the Chilean and Argentinean borders. A portion of the orebody lies directly under the glaciers, and Barrick had initially planned to “relocate” 816,000 cubic meters of ice from the area in order to facilitate access to the gold and lessen the environmental impact of their activities. The citizens who live and farm downstream of the glacial melt have some objections, and somehow I don’t think a proposal of that nature would go over too well in the Comox Valley either.

Barrick is under considerable pressure on a number of fronts to mitigate any and all environmental risks involved with this mine’s operations. As one of Canada’s dwindling number of home-based, multi-national corporations, Barrick’s shareholders will include the majority of Canadian citizens, who own a piece of the company either directly, or indirectly through their mutual fund or pension plans. While to date it’s likely that only a small percentage of individual shareholders are even aware of the debate surrounding the Pascua Lama project, the socially responsible investment (SRI) community has noticed, and a coalition of ethical money managers will take Barrick to task at their 2006 annual general meeting (AGM) if an ongoing dialogue regarding the project does not yield satisfactory results.

Regrettably, Barrick has not delivered on a number of other issues relating to environmental, social and governance (ESG) performance, and as a result, Canada’s chief provider of research on ESG to the investment community, Michael Jantzi and Associates, has recommended that Barrick be deemed ineligible for investment portfolios that are managed in accordance with criteria in the areas of community relations, aboriginal relations, occupational health and safety, environmental performance, and/or human rights.

It is difficult to gauge the effect such an initiative might have on the actions of Barrick management. If some, or even all of North America’s socially responsible fund companies decide to divest themselves of Barrick shares, the impact on Barrick’s share price would likely be short-term and minimal. If the managers of Canada Pension Plan assets were to do the same, Barrick would likely be much more accommodating on a number of issues they face.

The aim of the SRI community is not, however, to have the world divest themselves of Barrick shares, just as the aim of the anti-Apartheid movement of the 70’s and 80’s was not to have the world divest from South Africa. According to a prominent manager of SRI funds in Canada, “Our ultimate objective is to see publicly-traded corporations advance long-term wealth creation in support of a more just and sustainable world.” Quite a mouthful, and certainly not an evolution that is achieved overnight. But exercising one’s rights as a shareholder is surely one of the more effective ways to sway corporate management. And it’s not about winners and losers; it is about collaborative partnerships between all stakeholders – investors, employees, suppliers, customers and communities.

Barrick’s rebuttal to it’s Pascua Lama critics is prominently featured on their website at www.barrick.com under the “Corporate Responsibility” banner. They are devoting significant effort to publicizing their social and environmental commitments across the entire range of company operations. Barrick certainly has it right when they say, “Good corporate citizenship is a calling card that precedes us wherever we go.” And so is bad.

An environmental calamity at any of Barrick’s operations would leave them vulnerable to litigation and reparations that could have long lasting effects not just on the value of their shares, but on the lives of those in the communities where they operate. These days, investment policy increasingly accounts for a ‘triple bottom line’, where benefits and risks are measured across social, environmental and financial criteria. I for one think that Barrick understands this, as it is surely one of the keys to their future success.