RiskJune 24, 2019

Danish Pension Dumps Vale After Intervention Fails

MP Pension adds Vale to exclusion list after engagement talks prove fruitless.

Reported by Michael Katz

Denmark’s DKK112 billion ($16.8 billion) Magistre & Psykologer (MP) Pension said it is excluding Brazilian mining company Vale because it believes the company’s activities violate the pension’s policy for responsible investment. MP Pension said it tried to influence the company to change through dialogue, “but it has not led to the desired improvements.”

The divestment of Vale follows the January collapse of a Vale-owned dam in Brumadinho, Brazil, that killed more than 200 people and created what is considered that biggest environmental disaster ever in Brazil’s history. And that came just a little more than three years after another one of Vale’s dams in Brazil collapsed and killed 19 people. At the time, that was considered the worst environmental disaster in the country’s history.

“We have long been watching Vale … because of the Brumadinho disaster,” Anders Schelde, investment manager at MP Pension, said in a release. “In recent months, MP Pension has strengthened its efforts to influence the company through dialogue, but it has not led to the desired improvements, so now they come to our exclusion list.”

MP Pension has investments in Vale worth NOK26.2 million ($3 million), and has investments in corporate bonds issued by Vale subsidiary Samarco Mineracao for a total of DKK5.7 million, which will also be included in the exclusion.

“If a company violates our policy for responsible investment, we will initially try to influence the companies in a positive direction by entering into dialogue and voting at the companies’ general meetings,” said MP Pension. “We constantly make an assessment of whether the dialogue is expected to bring anything along with the resources it will require to keep the dialogue going. If the effort does not work, we will stop the investment and exclude the company in force.”

The pension re-evaluates the companies it invests for possible exclusion on a quarterly basis.

MP Pension said that in addition to the accidents in Brazil, Vale has also had “a number of challenges” related to its mining activities in the Moatize mine in Mozambique.

The pension said it is currently holding dialogues with more than 300 companies to try to influence them to align their activities with the pension’s responsible investing goals. The pension has a cooperation agreement with Hermes EOS, which is responsible for the practical work with dialogue on behalf of MP Pension for investments outside of Denmark.