28 Sep 2012

Human rights breaches in Papua the key factor behind NZ divestment

10:40 am on 28 September 2012

The New Zealand Superannuation Fund has decided to end its investment in the huge copper and gold mine in Indonesia's Papua region operated by US-based company Freeport McMoRan.

Until now, the Fund, of more than 15 billion US dollars, has had just over a million US dollars directly invested in the Grasberg mine, and had rejected calls that this was an inappropriate investment of public money.

Ongoing human rights breaches are a key factor in the Super Fund decision.

The Fund's manager for responsible investment, Ann-Maree O'Connor says they became concerned at a recurrence of security issues at the world's biggest mine.

"The context is such that there have been fatalities at the mine, that there have been reports by MSCI and other sources of information that these have breached human rights standards so we believe that the situation is one that could continue well into the future, and those are the standards that we look at when we considering reviewing the behaviour of companies."

Freeport's policy of contracting Indonesia's security forces to provide security around the mine has been controversial.

Amid an ongoing turf war between police and the military for the various Freeport security contracts, violent attacks near the mine and an industrial dispute have resulted in over a dozen deaths in the past year alone.

The Super Fund chief executive Adrian Orr says they engaged with Freeport for some time to try and help improve the rights standards of the mine operations.

He says they've now a hit a wall.

Comparing the standards that they've set against what we expect - the United Nations global compact standards around human rights - we've come to the conclusion that those standards are not going to be good enough. They're not going to meet our level of comfort and respect. And further engagement from us isn't going to make sufficient difference.

Meanwhile, the co-leader of New Zealand's Green Party Russel Norman is welcoming the withdrawal, which follows a similar Freeport divestment by the Norwegian Pension Fund several years ago on environmental grounds.

The people of West Papua will, I think, will receive the information very gratefully, the fact that the New Zealand government, the New Zealand Super Fund is taking a stand against the terrible practices of this miner. I think it's great news.

The New Zealand-based Indonesia Human Rights Committee's Maire Leadbetter feels that extensive lobbying by the Committee over Freeport's Papua record has played a part in the Super Fund decision.

We've given them a really hard time over six years. We've had demonstrations outside their front door, we've been on deputations where we've argued pretty strongly with them. They've sometimes had bad press... and the whole drive towards ethical investment has probably been a factor in this too. But yes it's a win, a win for the people of West Papua indirectly because they're the ones who really stand to benefit if Freeport is challenged.

Maire Leadbetter is pushing the Super Fund to now divest from Rio Tinto because it is a joint partner of Freeport's in the Papua mine.

But Adrian Orr says their decision is based on who is the operating company and that Rio is only a minor partner.

However he says some companies remain on the Super Fund watchlist.