Calvert Awaits Dodd-Frank Rules on Conflict Minerals and Extractive Revenue Payments
New rules will bring necessary transparency and disclosure to investors while seeking to help to end the conflict in the Congo and curb corruption in the oil and mining industries around the world.
Calvert has played a leading role among investors in the rule-making process for both Dodd-Frank Section 1502 Conflict Minerals and Section 1504 Resource Payment Reporting Requirements that will be voted on by the SEC on Wednesday, August 22. The culmination of a complicated and controversial two year process since the original legislation was enacted in July 2010, the rules will require companies registered on U.S. exchanges to make unprecedented disclosures of potentially material risks to investors which have not previously received sufficient attention. Section 1502 requires companies to disclose their efforts to identify and eliminate the use of certain minerals that have helped to fund the continuing conflict in Democratic Republic of the Congo (DRC), while Section 1504 requires oil, gas and mining companies to disclose revenue payments they make to governments around the world.
For the first time, investors will be able to evaluate these risks across industries and portfolios in ways that have not before been possible, thanks in part to Calvert's leadership on both provisions.
Dodd-Frank Section 1504—Extractive Revenue Disclosure
Dodd-Frank Section 1504 requires oil, gas and mining companies to disclose payments they make to the governments of countries where they operate around the world. Calvert's April 2010 report "Materiality of the Disclosure Required by the Energy Security Through Transparency Act" argued that disclosure of such payments can provide investors with material information related to a number of companies operating in countries where the lack of transparency has contributed to corruption, poor governance and conflict. The resource payment disclosures required by Section 1504 are essential to investors' evaluation of the growing social, regulatory and taxation risks faced by oil, gas and mining companies as they venture further into countries with these severe problems.
Throughout the two year rule-making process, Calvert took the lead among investors by making the case for a strong, comprehensive rule to implement Section 1504 directly to SEC commissioners and staff through a series of written comments and meetings. Calvert also mobilized a broad group of investors with total assets under management of more than $1 trillion to send letters to the SEC supporting the clear legislative intent of Section 1504.
Dodd Frank Section 1502—Conflict Minerals
At the same time, Calvert joined other investors in taking a leading role in support of Section 1502 addressing conflict minerals. The legislation requires disclosure by companies that use gold, tin, tantalum, and tungsten in their products to determine whether such metals originate from particular mines in the DRC or adjoining countries that have been used as "conflict minerals" to pay for weapons that have fueled the world's bloodiest conflict since the Second World War. The new rule will allow investors to evaluate the efforts of companies in industries, ranging from electronics and auto parts to retailers and jewelers, to identify and eliminate the use of conflict minerals in their supply chains. Most important, it should diminish the use of conflict minerals and in turn could help end the conflict in the DRC.
An early supporter of the legislation, Calvert has since engaged in the SEC rule-making process as part of a multi-stakeholder coalition of investors, human rights groups such as Enough and Global Witness, and major multinational corporations including GE, HP, AMD and Intel. The coalition submitted letters to the SEC addressing a series of technical issues while urging swift completion of the rule and implementation of the law. Calvert was called upon to give public testimony to the SEC Commissioners at an October 2011 SEC Roundtable that was convened to address the complex and controversial issues at stake in the conflict minerals rule.
Calvert will make use of these new disclosure rules as we continue to evaluate risk across our portfolios. At the same time, we will continue to work with other investors to urge companies to identify and eliminate any use of conflict minerals in their supply chains in order to help end the fighting and killing in the DRC. We will also urge other jurisdictions which list extractives companies—especially the UK and the EU as well as Canada and Australia—to enact similar mandatory revenue disclosure requirements so that we can improve governance of oil, gas and mineral resources around the world.
Calvert shareholders can count on us to continue to be a leader on these important policy initiatives intended to diminish risk to investors and use the power of investment to improve the world at the same time.
Calvert Investment Management Inc. 4550 Montgomery Avenue, Bethesda, MD 20814.