tag:theconversation.com,2011:/es/topics/glencore-21026/articlesGlencore – The Conversation2021-04-12T15:23:55Ztag:theconversation.com,2011:article/1575292021-04-12T15:23:55Z2021-04-12T15:23:55ZHow large miners and states stifle local capital and innovation in DR Congo<figure><img src="https://images.theconversation.com/files/394437/original/file-20210412-17-14pdrxa.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Rescuers work in Kamituga, South Kivu, at the entrance of one of the mines which collapsed following torrential rains trapping dozens of artisanal miners in September 2020.
</span> <span class="attribution"><span class="source">Photo by Stringer/AFP via Getty Images</span></span></figcaption></figure><p>Over the last few decades, African governments have removed restrictions on and privatised their mining industries, <a href="http://documents1.worldbank.org/curated/en/550381468330990173/pdf/605130NWP0Mini10BOX358322B01PUBLIC1.pdf">attracting significant foreign direct investment</a>. As a result, the continent’s mining industry has become dominated by transnational corporations such as <a href="https://www.glencore.com/world-map">Glencore</a>, <a href="https://www.angloamerican.com/about-us/where-we-operate">AngloAmerican</a> and <a href="https://www.barrick.com/English/operations/default.aspx">Barrick Gold</a>.</p>
<p>Alongside these corporate giants, operating largely beyond the formal reach and control of African governments, sits the artisanal and small-scale mining sector. This is <a href="http://www.oecd.org/daf/inv/mne/oecd-due-diligence-guidance-minerals-edition3.pdf">defined by the OECD</a> as </p>
<blockquote>
<p>mining operations with predominantly simplified forms of exploration, extraction, processing, and transportation. </p>
</blockquote>
<p>Roughly <a href="https://www.iisd.org/system/files/publications/igf-asm-global-trends.pdf?q=sites/default/files/publications/igf-asm-global-trends.pdf">one quarter of the global gold, tin and tantalum supply</a> is produced by artisanal and small-scale miners. In 2019, there were <a href="https://www.planetgold.org/sites/default/files/2019-12/Delve-2019-State-of-the-Artisanal-and-Small-Scale-Mining-Sector.pdf">an estimated 10 million people</a> working in the sector across sub-Saharan Africa.</p>
<p>The mass privatisation of mining and the turn to foreign direct investment has created conflict with these miners. They have been displaced and marginalised. Displacement is often financed by corporations and <a href="https://link.springer.com/article/10.1007/s11077-009-9091-5">carried out as government military-led ‘sweeps’</a>.</p>
<p>The African mining literature (especially the more influential <a href="https://core.ac.uk/download/pdf/109601.pdf">policy papers</a> and <a href="https://www.un.org/en/africa/osaa/pdf/pubs/2014afrecooutlook-afdb.pdf">flagship development agency reports</a>) has been centrally preoccupied with how African firms can integrate into industrial mining value chains led by foreign corporates. It seldom considers how and from whom value is transferred when industrial mines interact with small-scale mining economies.</p>
<p>In our <a href="https://www.tandfonline.com/doi/full/10.1080/03056244.2020.1865902">recently published research</a> looking at the case of South Kivu province in the eastern Democratic Republic of Congo (DRC), we document these ‘<a href="https://journals.sagepub.com/doi/10.1068/a43505">everyday practices and struggles over value</a>’. We demonstrate how a coalition between foreign corporate capital and the Congolese state has held back local processes of adopting technology and forming capital. We direct attention towards the important role played by small-scale mining in African societies and economies, and how transnational corporations hobble the potential of this sector.</p>
<h2>Capital formation and mechanisation</h2>
<p>Artisanal mining is the most important source of livelihood after agriculture in South Kivu. Nevertheless, transnational corporations have hoovered up the most valuable and strategically important deposits, forcing artisanal miners to more marginal and less productive areas.</p>
<p>Hundreds of thousands working in the province produce <a href="https://www.eca-creac.eu/sites/default/files/pdf/2014-08-kamundala-marysse-mukotanyi.pdf">an estimated 4,800 kilograms of artisanal-mined gold annually</a>. In 2020, this equated to a market value of around $265 million. The value of Congo’s total gold production is approximately $2 billion annually.</p>
<p>Artisanal miners extract gold from underground pits, alluvial sites and riverbeds. In Kamituga, South Kivu’s largest mining town, where we conducted our research, drillers and diggers go down in pits of up to 100 metres deep.</p>
<p>Outside the pits, the extracted ore is ground and processed using mercury amalgamation. The gold is sold to local traders, who in turn sell to master traders, who smuggle most of the gold production to neighbouring countries. It’s then taken to destinations such as Dubai.</p>
<p>Of the estimated $265 million in artisanal gold South Kivu produced in 2020, our research in Kamituga has shown that artisanal and small-scale Congolese miners and traders captured between 90% and 95% – $240 million to $250 million. This estimate is based on survey and financial logbook data collected from mine workers and managers in 2009-2010, 2015, 2016 and 2017. </p>
<p>The bottom category of mine workers, such as transporters and diggers, earn between $56 and $136 per month. Skilled workers such as timber workers, drillers and machine operators earn between $116 and $180 per month. Technical directors and team leaders earn between <a href="https://blog.uantwerpen.be/sustainable-global-society/artisanal-gold-mining-pays/">$172 and $412 per month</a>. Successful shaft managers can make a profit of between $764 and $1670 per month. Small traders make between $200 and $400 per month, while master traders make much more, up to several thousands of dollars per month.</p>
<p>Shaft managers and traders invest part of their profits in farming and livestock, real estate, commerce, transport, and non-mining productive activity (such as brick making). Managers and traders also import consumer goods, construction material and food into the country for resale.</p>
<p>They also reinvest in gold production, which drives investment in production technologies and mechanisation. As a result, artisanal mining in South Kivu has become more productive. Around 2010, shaft managers noticed a decrease in the quality of the extracted ore in Kamituga. In response, they introduced machinery that grinds large rocks into fine powder. Initially imported from Tanzania and eventually manufactured in local workshops, it allowed exhausted pits to become productive again. Shaft managers also started constructing their own pylons to connect sites to the local electricity grid.</p>
<p>Congolese managers and traders in Kamituga have driven a process of semi-mechanised gold mining, all of it based on locally made machinery. Their major problem, however, has been that they were working in an area under concession of the Canada-based multinational Banro Corporation.</p>
<h2>Corporate-state suppression</h2>
<p>Banro’s permits made any artisanal and small-scale mining on its grounds illegal. It initially tolerated this on its Kamituga concession, but its attitude changed when artisanal miners mechanised. Banro saw mechanisation as depleting the deposits on its concession far more rapidly than the traditional artisanal mining methods.</p>
<p>In response, in early 2013 Banro laid charges against owners of the grinding machinery in Kamituga. Eventually, their mills were appropriated by state agents with the support of local military and police. </p>
<p>By 2017, there was still no judgement on the case against the mill owners. The president of a miners’ association in Kamituga reflected that </p>
<blockquote>
<p>Since 2012, artisanal miners have been leading a life of uncertainty. They continue in their work, not knowing what day their enemy will surprise them. </p>
</blockquote>
<p><a href="https://www.newswire.ca/news-releases/banro-announces-intention-to-proceed-with-recapitalization-plan-675809993.html">Banro has since gone into Canadian government creditor protection</a> and the DRC has got a new president and South Kivu governor. These developments have shifted the balance of power away from foreign corporations. </p>
<p>But the breathing space for small miners might not last long. The Congo has a long history of the state and mining corporations working together to suppress artisanal and small-scale miners in South Kivu. This has happened across different political regimes since the 1970s.</p>
<h2>Conclusion</h2>
<p>The World Bank continues to promote the potential benefits of foreign-led industrial mining across Africa. Yet African governments are beginning to depart from this prescription <a href="https://www.bloomberg.com/news/articles/2019-02-14/the-fight-between-miners-and-african-governments-is-just-getting-started">and confront foreign mining corporations</a>. This shift might represent an ideological break with the past, and the emergence of alternatives to a disruptive model.</p>
<p><em>This article was first published in an extended format on the <a href="https://roape.net/2021/03/09/struggles-over-value-suppression-of-locally-led-capital-accumulation-in-the-congo/">Review of African Political Economy blog</a>.</em></p><img src="https://counter.theconversation.com/content/157529/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ben Radley received funding from the Leverhulme Trust under grant number SAS-2016-047/7.</span></em></p><p class="fine-print"><em><span>Sara Geenen received funding from FWO-EOS under research grant G0G4318N.</span></em></p>The mass privatisation of mining and the turn to foreign direct investment has created conflict with small-scale miners.Ben Radley, Lecturer in International Development, University of BathSara Geenen, Assistant professor in Globalisation, International Development and Poverty, University of AntwerpLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1570232021-04-07T16:24:04Z2021-04-07T16:24:04ZSustainability rankings don’t always identify sustainable companies<figure><img src="https://images.theconversation.com/files/393675/original/file-20210406-15-16ubkld.jpg?ixlib=rb-1.1.0&rect=0%2C155%2C5184%2C2762&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">ESG rankings and lists aren't often entirely reliable for consumers or investors wanting to make decisions on companies they buy from or invest in.</span> <span class="attribution"><span class="source">Appolinary Kalashnikova/Unsplash</span></span></figcaption></figure><p><a href="https://www.bat.com/">British American Tobacco</a> (famous for cigarettes), <a href="https://www.coca-cola.ca/homepage">Coca-Cola</a> (world-renowned for its sugary soft drinks) and <a href="https://www.glencore.com/">Glencore</a> (a British/Swiss mining company) were recently ranked in the top five most environmentally and socially responsible companies <a href="https://www.hl.co.uk/news/articles/ftse-100-the-5-highest-esg-rated-companies">on the FTSE 100</a>, the share index of the 100 biggest companies listed on the London Stock Exchange.</p>
<p>As consumers and investors, we often look at environmental, social and governance (ESG) rankings to guide our purchase, investment and employment decisions. But what should we make of this list, compiled by British investment services firm Hargreaves Lansdown?</p>
<p>As kids, we learned that smoking kills, yet British American Tobacco has a place at the top of the list, suggesting it’s a highly responsible company. </p>
<p>Obesity, cardiovascular disease and diabetes are life-threatening diseases, yet Coca Cola, a leading sugar purveyor, also has a top ranking. </p>
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<img alt="A tractor trailer truck backs into a loading dock at Coca-Cola Beverages Florida past a Now Hiring sign." src="https://images.theconversation.com/files/393447/original/file-20210405-19-8aut0q.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/393447/original/file-20210405-19-8aut0q.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=384&fit=crop&dpr=1 600w, https://images.theconversation.com/files/393447/original/file-20210405-19-8aut0q.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=384&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/393447/original/file-20210405-19-8aut0q.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=384&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/393447/original/file-20210405-19-8aut0q.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=482&fit=crop&dpr=1 754w, https://images.theconversation.com/files/393447/original/file-20210405-19-8aut0q.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=482&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/393447/original/file-20210405-19-8aut0q.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=482&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">A tractor trailer truck backs into a loading dock at Coca-Cola Beverages Florida past a Now Hiring sign in May 2020, in Hollywood, Fla.</span>
<span class="attribution"><span class="source">(AP Photo/Wilfredo Lee)</span></span>
</figcaption>
</figure>
<p>Glencore is being investigated for <a href="https://www.glencore.com/media-and-insights/news/investigation-by-the-serious-fraud-office">alleged fraud offences</a>, yet it’s No. 4 on the same list. </p>
<h2>Meaningless?</h2>
<p>A number of lists rank companies as being “<a href="https://www.newsweek.com/americas-most-responsible-companies-2021">most responsible</a>” or the “<a href="https://www.corporateknights.com/reports/best-50/2020-best-50-results-15930648/">best corporate citizens</a>” or the “<a href="https://www.canadastop100.com/environmental/">most green</a>.”</p>
<p>The <a href="https://www.corporateknights.com/wp-content/uploads/2021/03/2021-Global-100_Methodology_Updated.pptx.pdf">Corporate Knights Global 100</a>, for example, is an annual list that evaluates companies based on their sustainability performance. Companies are given a score based on their environmental, social, governance and economic performance and then ranked from one to 100. </p>
<p><a href="https://www.newsweek.com/americas-most-responsible-companies-2021">Newsweek magazine’s</a> America’s Most Responsible Company list also ranks U.S. companies on their sustainability performance.</p>
<p>Its 2021 list ranked Citigroup as the country’s ninth most responsible firm. The bank was recently fined <a href="https://www.nytimes.com/2020/10/07/business/citigroup-fine-risk-management.html">US$400 million by federal regulators</a> for “unsafe and unsound banking practices.” </p>
<p>Microsoft is ranked third on the same list, yet earlier this year, <a href="https://www.forbes.com/sites/daveywinder/2020/01/22/microsoft-security-shocker-as-250-million-customer-records-exposed-online/?sh=545f84914d1b">250 million client records were exposed online without password protection.</a> </p>
<p>Procter & Gamble, 23rd on the Newsweek list, is <a href="https://www.bnnbloomberg.ca/p-g-shareholders-vote-in-favor-of-a-deforestation-report-1.1507649">currently being scrutinized</a> for its reliance on trees from Canada’s northern boreal forest.</p>
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<img alt="A forest with ferns and tall pine trees." src="https://images.theconversation.com/files/393867/original/file-20210407-15-za7qxq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/393867/original/file-20210407-15-za7qxq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/393867/original/file-20210407-15-za7qxq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/393867/original/file-20210407-15-za7qxq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/393867/original/file-20210407-15-za7qxq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/393867/original/file-20210407-15-za7qxq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/393867/original/file-20210407-15-za7qxq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">A portion of Canada’s boreal forest in Québec.</span>
<span class="attribution"><span class="source">Ali Kazal/Unsplash</span></span>
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</figure>
<p>In Canada, Corporate Knights ranks <a href="https://www.corporateknights.com/reports/2020-best-50/2020-best-50-results-15930648/">Canada’s Best 50 corporate citizens</a>. Leading the pack is Mountain Equipment Co-op, which recently apologized for the lack of diversity in a marketing campaign that <a href="https://www.cbc.ca/news/canada/ottawa/mec-diversity-ottawa-problem-open-letter-1.4880900">excluded people of colour</a>.</p>
<p>Hydro One, <a href="https://www.corporateknights.com/reports/best-50/2020-best-50-results-15930648/">in the No. 11 position</a>, has been taken to task for its <a href="https://financialpost.com/commodities/energy/ontario-energy-minister-on-hydro-one-ceo-pay-this-is-not-a-negotiation">executive compensation packages</a>.</p>
<h2>Consumers, investors look at rankings</h2>
<p>Increasing numbers of investors depend on ESG information from third parties for their investment decisions. Similarly, consumers are seeking <a href="https://www.businessnewsdaily.com/15087-consumers-want-sustainable-products.html">sustainable products</a> and looking to responsible firms to inform their <a href="https://www.voguebusiness.com/sustainability/the-rise-in-esg-ratings-whats-the-score">purchasing decisions</a>. </p>
<p>There are also <a href="https://www.bnnbloomberg.ca/an-inside-look-at-esg-ratings-and-why-they-should-matter-to-you-1.1564931">an increasing number of companies</a> entering the ESG rankings field. Currently there is no regulatory oversight or consistency across ranking agencies on what factors are being assessed in the rankings and who is assessing them. </p>
<p>As well, there are <a href="https://hbr.org/2020/09/the-challenge-of-rating-esg-performance">no global or nationally accepted standards</a> or consistent requirements on what should be reported or measured for ESG performance. Companies are evaluated based on a <a href="https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/why-esg-is-here-to-stay">wide range of criteria</a>, making it challenging for consumers and investors to make fully informed decisions.</p>
<p>Should investors look at <a href="https://www.bnnbloomberg.ca/an-inside-look-at-esg-ratings-and-why-they-should-matter-to-you-1.1564931">ESG ratings</a> to assess their investment choices and the associated risks? </p>
<p>We looked at the top five Canadian firms from Corporate Knights 2020 Global 100 list and searched the Sustainalytics ESG Risk Database to see their ESG risk. <a href="https://www.sustainalytics.com/esg-data/">Sustainalytics</a>, a company initially launched in Canada as <a href="https://www.sustainalytics.com/about-us/">Jantzi Research</a>, measures a company’s exposure to industry-specific ESG risks and how well a company is managing those risks, as well as the extent of any <a href="https://connect.sustainalytics.com/esg-risk-ratings-methodology?_ga=2.197064426.733883677.1616622971-1797556647.1616523490&_gac=1.249883186.1616623523.EAIaIQobChMIvenN8_fJ7wIVSuDICh116gILEAAYASAAEgJA-_D_BwE">unmanaged ESG risk</a>. </p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/393678/original/file-20210406-19-16wln4q.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="A Cascades sign is seen next to an evergreen tree." src="https://images.theconversation.com/files/393678/original/file-20210406-19-16wln4q.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/393678/original/file-20210406-19-16wln4q.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=370&fit=crop&dpr=1 600w, https://images.theconversation.com/files/393678/original/file-20210406-19-16wln4q.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=370&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/393678/original/file-20210406-19-16wln4q.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=370&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/393678/original/file-20210406-19-16wln4q.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=464&fit=crop&dpr=1 754w, https://images.theconversation.com/files/393678/original/file-20210406-19-16wln4q.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=464&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/393678/original/file-20210406-19-16wln4q.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=464&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">A Cascades plant is seen in Laval, Que. in A Cascades plant is seen in Laval, Que. in November 2020.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Paul Chiasson</span></span>
</figcaption>
</figure>
<p>Three Canadian companies — the <a href="https://www.sustainalytics.com/esg-rating/bank-of-montreal/1007897299/">Bank of Montreal</a>, <a href="https://www.sustainalytics.com/esg-rating/cascades-inc/1007973123/">Cascades</a> and <a href="https://www.sustainalytics.com/esg-rating/canadian-national-railway-co/1008231266/">Canadian National Railway</a> — were ranked as low risk, while two, <a href="https://www.sustainalytics.com/esg-rating/algonquin-power-utilities-corp/1008760564/">Algonquin</a> and <a href="https://www.sustainalytics.com/esg-rating/bombardier-inc/1008573450/">Bombardier</a>, which placed even higher on the Corporate Knights Global 100 list than the three aforementioned companies, are considered high risk by the Sustainalytics ESG Risk rating. </p>
<h2>No consistency</h2>
<p>Why would one well-known ESG ranking agency rate a company a leader while another flag it as high risk? If all the ratings and rankings are measuring ESG, we would anticipate consistency across rankings.</p>
<p>While rankings should help us in our quest to make better, more sustainable decisions and choose ethical companies as <a href="https://hbr.org/amp/2019/06/research-actually-consumers-do-buy-sustainable-products">consumers</a> and investors, they can be misleading and provide only a partial view of a company’s ESG commitments. </p>
<p>When determining which rankings to trust, we suggest looking for ranking agencies that use public information to assess companies on ESG performance. Quality ranking organizations are transparent about how they analyze companies and come up with their rankings. Those reading the lists should be able to assess the information provided in the ranking quickly and with confidence about what it really says.</p>
<p>Look for rankings that don’t accept payment from companies to participate; this reduces their power to influence their placement. Look at information from multiple rankings and ratings.</p>
<p>When companies in <a href="https://www.tandfonline.com/doi/abs/10.1080/00208825.2004.11043718">contested industries</a> (those that do harm) score high in sustainability rankings, it should raise serious questions about the validity of the ranking.</p>
<p>Rather than blindly trusting rankings, understand the information provided by each list. While rankings are designed to offer compressed information, unfortunately, we still need to do our own research to evaluate companies.</p><img src="https://counter.theconversation.com/content/157023/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Some companies rank high on some lists that measure environmental, social and governance (ESG) initiatives, and rank near the bottom on other lists. Which rankings should we trust?Rumina Dhalla, Associate Professor, Organizational Studies and Sustainable Commerce and Director, Institute for Sustainable Commerce, University of GuelphFelix Arndt, John F. Wood Chair in Entrepreneurship, University of GuelphLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1240772019-09-25T20:42:51Z2019-09-25T20:42:51ZWhen it comes to climate change, Australia’s mining giants are an accessory to the crime<figure><img src="https://images.theconversation.com/files/293994/original/file-20190925-51421-9gguni.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Australia's major mining companies are significant contributors to global emissions. </span> <span class="attribution"><span class="source">Global Warming Images</span></span></figcaption></figure><p>There are many reasons for Australia’s absence from the podium of the the United Nations Climate Action Summit this week. No doubt it would send a poor message if emission reduction laggards such as Australia had taken centre stage. </p>
<p>But Australia is also the world’s <a href="https://www.abc.net.au/news/science/2019-08-19/australia-co2-exports-third-highest-worldwide/11420654">largest exporter of coal</a> and <a href="https://www.climatecouncil.org.au/australia-worlds-largest-gas-exporter/">liquified natural gas</a>. And by providing fossil fuel subsidies and exploration rights, the Australia federal government <a href="https://www.marketforces.org.au/campaigns/ffs/tax-based-subsidies/">encourages its major mining companies to export more</a>. This situation is now profoundly hostile to action on climate change.</p>
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Read more:
<a href="https://theconversation.com/australias-energy-exports-increase-global-greenhouse-emissions-not-decrease-them-118990">Australia's energy exports increase global greenhouse emissions, not decrease them</a>
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</p>
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<p>The emissions produced from the fossil fuels extracted by Australia’s major gas, coal and oil producing companies – our “carbon majors” – such as BHP, Glencore and Yancoal, are now larger than all Australia’s domestic emissions.</p>
<p>While these companies, and Australia itself, have no legal responsibility for these “exported” emissions, morally it is comparable to selling uranium to a failed state or dumping medical waste unsafely. We understand the harm our exports cause, and are therefore at least partially culpable for the harms they cause.</p>
<h2>We think in nations, not companies</h2>
<p>Why aren’t Australian carbon majors considered to be responsible for addressing their emissions and their consequences? One reason is when we think about reducing emissions, we typically focus on the role of nations. </p>
<p>After all, it is nations that negotiate climate agreements, and their policies are substantially responsible for the contribution their citizens make to the problem of climate change.</p>
<p>But the impact of carbon majors is now so large, we must make the case for holding them responsible for the consequences.</p>
<p>In 2018 alone, BHP’s global fossil fuel production led to the emissions of the equivalent of <a href="https://www.bhp.com/-/media/documents/investors/annual-reports/2018/bhpscoper3emissionscalculationmethodology2018.pdf?la=en">596 megatonnes (Mt) of CO₂-equivalent</a> . Over the <a href="https://www.bhp.com/investor-centre/financial-results-and-operational-reviews">last 15 years</a> BHP’s Australian coal operations have produced 1,863Mt of CO₂-e.</p>
<p>These figures would be significantly higher still if we included the remainder of the emissions since 1990, when the <a href="https://www.ipcc.ch/report/climate-change-the-ipcc-1990-and-1992-assessments/">first major report</a> from the Intergovernmental Panel on Climate Change revealed the risks of climate change and the consequences of emissions. </p>
<p>To put that in perspective, in 2018 BHP’s emissions from its global fossil fuel operations alone were more than the <a href="https://www.environment.gov.au/system/files/resources/128ae060-ac07-4874-857e-dced2ca22347/files/australias-emissions-projections-2018.pdf">whole of Australia’s domestic emissions</a> (534Mt CO₂-e) for 2018. If BHP were a country, the products it produces would cause emissions greater than those emitted by 25 million Australians.</p>
<p>As well as their current levels of production, many of the carbon majors hold vast reserves to be extracted in the future as well as new fossil fuel projects. Glencore, the largest coal mining company in Australia, <a href="https://www.glencore.com/dam/jcr:b4e6815b-3a2c-43ca-a9ef-effe606bb3c1/glen-2018-annual-report.pdf">reported in 2018</a> that they have 6,765Mt of measured metallurgic coal resources, and 1,565Mt of thermal coal in proved marketable reserves. Together, that’s the equivalent of 18,202Mt of CO₂, more than 34 times <a href="https://www.environment.gov.au/system/files/resources/128ae060-ac07-4874-857e-dced2ca22347/files/australias-emissions-projections-2018.pdf">Australia’s 2018 carbon emissions</a>.</p>
<h2>Moral responsibility</h2>
<p>But why should we hold the companies themselves responsible for these emissions? After all, except for the emissions created during the extraction process, they don’t themselves directly produce these emissions. For the most part, carbon majors contribute by being producers and suppliers of fossil fuels.</p>
<p>Like nations, carbon majors are seen as having responsibility only for emissions they have produced directly in operating a mine or transporting their commodities to port. This is the “territorial” model of emissions attribution.</p>
<p>Yet the responsibility of carbon majors is much greater than this territorial model suggests. To see how this might be the case, it is useful to draw on some basic moral and legal theory.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/youth-climate-movement-puts-ethics-at-the-center-of-the-global-debate-123746">Youth climate movement puts ethics at the center of the global debate</a>
</strong>
</em>
</p>
<hr>
<p>For example, a murderer or thief is <em>directly</em> responsible for the harm they cause their victim. They pulled a trigger or absconded with the money, and no-one else shares that direct blame. </p>
<p>But in the case where a person intends to shoot another person and I announce that I will sell them a gun — knowing full well what it will be used for — the responsibility for the murder no longer falls solely on the person who pulls the trigger. Given I sold the gun knowing that someone would be harmed, I am now an accomplice to the crime and should share at least some of the blame.</p>
<p>In this case, there is a relationship between my actions and the murder that ought to make me at least partially responsible.</p>
<p>In the case of carbon majors, by producing and selling fossil fuels which are, in turn, consumed in another country, they are complicit in the harm directly caused by their customer: the releasing of greenhouse gas into the atmosphere by consuming the fuel.</p>
<p>Australia’s carbon majors are accessories to the wrongful harm of climate change.</p>
<h2>Shared blame</h2>
<p>These companies of course point out they are not wholly responsible – other companies and people actually use the fossil fuels overseas, where the emissions count towards another country’s tally. But accepting even some fault for the effect of their exports is a huge increase in a company’s moral responsibility over what they currently admit.</p>
<p>What does this mean in practice? First of all, it means that they have a strong moral reason to stop contributing to the harm by appropriately cutting their fossil fuel operations in line with IPCC timeframes and take a fair share of their climate-related liabilities. They should also stop seeking support for fossil fuels through lobbyists, politicians, “think tanks” and industry groups. </p>
<p>It will be argued that such actions will be costly to the carbon majors. But unless we are willing to concede that it is acceptable to harm others without sanction or an end it sight, this is not a convincing response.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/coal-does-not-have-an-economic-future-in-australia-102718">Coal does not have an economic future in Australia</a>
</strong>
</em>
</p>
<hr>
<p>However as citizens, we also need to move beyond reducing our domestic emissions. As voters, investors and consumers, we share a responsibility for our exported emissions. Ending state and institutional support for carbon majors should now be a major focus of climate action.</p><img src="https://counter.theconversation.com/content/124077/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jeremy Moss receives funding from the Australian Research Council. </span></em></p>Australia cannot distance itself from moral responsibility for emissions from exported fossil fuels.Jeremy Moss, Professor of Political Philosophy, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1169722019-08-14T06:18:57Z2019-08-14T06:18:57ZAustralia’s tax office can use global data leaks to pursue multinationals, High Court rules<figure><img src="https://images.theconversation.com/files/279283/original/file-20190613-32342-od0r5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Glencore's lawyers argued anything about the company in the Paradise Papers was "privileged" and the tax office should be prevented from using that information.</span> <span class="attribution"><span class="source">www.shutterstock.com</span></span></figcaption></figure><p>Can something that has been seen be unseen? </p>
<p>It’s an <a href="https://knowyourmeme.com/memes/what-has-been-seen-cannot-be-unseen">axiom</a> of the internet age that it can’t – and though the world’s biggest mining company, <a href="https://www.glencore.com/who-we-are/at-a-glance">Glencore</a> would like it to be otherwise, it’s one with which the High Court of Australia has agreed in a landmark case concerning tax havens and data leaks.</p>
<p>Last year Glencore went to <a href="http://www.hcourt.gov.au/cases/case_s256-2018">the court</a> to demand the Australian Taxation Office unsee what it might have seen about Glencore’s use of offshore legal lurks to minimise its Australian tax obligations.</p>
<p>What had the Anglo-Swiss multinational bothered was information from the single biggest data leak in history – called the <a href="https://www.icij.org/investigations/paradise-papers/">Paradise Papers</a> because the documents exposed the use of “tax paradises” by corporations and wealthy individuals.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/four-things-the-paradise-papers-tell-us-about-global-business-and-political-elites-86946">Four things the Paradise Papers tell us about global business and political elites</a>
</strong>
</em>
</p>
<hr>
<p>Glencore’s lawyers argued anything about the company in the leaked documents was “privileged” and the tax office should be prevented from using that information to pursue the company for more money.</p>
<p>Today the <a href="http://eresources.hcourt.gov.au/downloadPdf/2019/HCA/26">High Court agreed</a> the leaked documents were privileged. But it also ruled the tax office could use them. This gives the tax office a green light to use leaked documents to go after any multinational corporation or individual using tax havens to minimise their tax obligations.</p>
<h2>The Paradise Papers</h2>
<p>Glencore was among about 120,000 companies and people mentioned in the Paradise Papers. The papers entail more than 13 million documents handed over to the <a href="https://www.icij.org/investigations/paradise-papers/">International Consortium of Investigative Journalists</a>, which published its first stories in November 2017. Other companies named in the documents include Apple, Facebook, McDonald’s, Nike, Twitter and Uber. Individuals include Queen Elizabeth and pop singer Shakira.</p>
<p>The data leak, like the <a href="https://www.icij.org/investigations/panama-papers/">Panama Papers</a>, <a href="https://www.icij.org/investigations/luxembourg-leaks/explore-documents-luxembourg-leaks-database/">Luxembourg Leaks</a> and <a href="https://eic.network/projects/football-leaks">Football Leaks</a>, illuminated the secretive tax-haven industry for tax agencies. </p>
<p>Prior to the Paradise Papers, the Panama Papers led about two-dozen national agencies to <a href="https://www.icij.org/investigations/panama-papers/panama-papers-helps-recover-more-than-1-2-billion-around-the-world/">collect more than US$1.2 billion</a> in fines and back taxes. The Australian Taxation Office was one of the biggest collectors, recovering more than US$92 million.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/these-five-countries-are-conduits-for-the-worlds-biggest-tax-havens-79555">These five countries are conduits for the world's biggest tax havens</a>
</strong>
</em>
</p>
<hr>
<p>Glencore was hoping to ensure the tax office couldn’t use the Paradise Papers to do the same. While in Canada it agreed to pay regulators <a href="https://www.icij.org/investigations/paradise-papers/glencore-fights-transparency-on-one-continent-pays-22m-settlement-on-another/">US$22 million in fines</a> for corporate wrongdoings exposed by the leaked documents, it decided to take a different tack in Australia – where its operations include 25 mines extracting coal, copper, zinc, nickel and bauxite.</p>
<p>Even if the documents exposed Glencore’s connection to secretive deals and hidden companies, Glencore’s lawyers argued they were between lawyer and client, and therefore confidential, covered by “legal professional privilege”.</p>
<p>Because of this privilege, Glencore’s lawyers said, the tax office should not be able use the information to demand more money. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/287963/original/file-20190814-136222-15hislf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/287963/original/file-20190814-136222-15hislf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/287963/original/file-20190814-136222-15hislf.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/287963/original/file-20190814-136222-15hislf.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/287963/original/file-20190814-136222-15hislf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/287963/original/file-20190814-136222-15hislf.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/287963/original/file-20190814-136222-15hislf.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The possibilities that follow letting a cat out of a bag have been canvassed before the High Court of Australia.</span>
<span class="attribution"><span class="source">www.shutterstock.com</span></span>
</figcaption>
</figure>
<h2>When a cat is let out of a bag</h2>
<p>Barristers on both sides discussed the case in terms of a cat being let out of a bag. </p>
<p>The tax office’s position was that “privilege” only meant someone could refuse to let a cat out of the bag. Once a cat was out of the bag, however,
“privilege” couldn’t be used to put the cat back. </p>
<p>Glencore’s position was that it could, because the cat was still a cat.</p>
<p>The High Court’s justices did not agree with Glencore’s barristers. In their unanimous decision, they state: </p>
<blockquote>
<p>“The Glencore documents are in the possession of the defendants and
may be used in connection with the exercise of their statutory powers unless the
plaintiffs are able to identify a juridical basis on which the Court can restrain that use.”</p>
</blockquote>
<p>This means “privilege” only prevents the tax office from demanding Glencore let the cat out the bag. Now the cat is out of the bag, Glencore can’t ask the tax office to pretend it has not seen the cat. </p>
<h2>Greater loopholes remain</h2>
<p>While this means the tax office can now use leaked documents to pursue a company or individual for more tax, it doesn’t necessarily mean the federal government is about to reap a revenue windfall.</p>
<p>To begin with, tax officials will still need to trawl through millions of documents. To do so will take time and money. </p>
<p>Then, to have a strong case, the tax office will need to find that companies or individuals aren’t just deliberately structuring their tax affairs to minimise tax – because that’s allowed – but are going further, into the illegitimate area of “aggressive tax planning”. </p>
<p>This is the greater problem for Australia’s tax office – not the companies doing something clearly shady but those whose legal resources are so far ahead of the tax office that they can achieve all they want in minimising tax through completely legal loopholes. </p>
<p>It takes years for loopholes to be closed, and once they are, corporate tax advisers just find news ones.</p>
<p>It’s a game between a nimble, well-advised mouse and a slower-moving cat. </p>
<p>That’s a problem no High Court decision can solve. Only a federal government committed to genuine tax reform can do it.</p><img src="https://counter.theconversation.com/content/116972/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The High Court of Australia has given the Australia Taxation Office a green light to use leaked information about Glencore and offshore tax havens.Ann Kayis-Kumar, Associate Professor, UNSW SydneyAnnet Oguttu, University of PretoriaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/728622017-02-21T03:48:17Z2017-02-21T03:48:17ZMount Isa contamination ‘within guidelines’ but residents told to clean their homes<figure><img src="https://images.theconversation.com/files/156541/original/image-20170213-23316-1is1w3a.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Industrial emissions have blown across Mount Isa for decades.</span> <span class="attribution"><span class="source">Mark P. Taylor</span>, <span class="license">Author provided</span></span></figcaption></figure><p>After an 11-year wait, Mount Isa Mines has released the <a href="http://www.mountisamines.com.au/EN/sustainability/Documents/2_UQ_Lead%20Pathways%20Study%20Air%20Report%20-%20Executive%20Summary%20FINAL.pdf">official report</a> into the lead contamination that has blighted the city for decades. </p>
<p>The report, commissioned by the mine’s owner, Glencore, and produced by researchers at the University of Queensland, says that household dust contaminated by airborne lead from the mining and smelting operations is the dominant source of the city’s exposure. </p>
<p>In some aspects this marks an important shift in the industry’s acceptance of the problem. Yet the report goes on to argue that Mount Isa residents are nevertheless responsible for keeping themselves, their houses and their children free from dust, thus putting the onus back on them to avoid exposure to the contamination.</p>
<h2>A history of excuses</h2>
<p>This is the latest iteration in the decade-long evolution of Mount Isa Mines’ <a href="http://www.mountisamines.com.au/EN/Media/Media_Documents/STATEMENT%20REGARDING%20THE%20RELEASE%20OF%20THE%20200708%20NATIONAL%20POLLUTANT.pdf">arguments</a> rebutting research that linked the contamination to its mining and smelting operations.</p>
<p>Back in 2007, when owned by Xstrata, Mount Isa Mines <a href="http://www.abc.net.au/worldtoday/content/2007/s1876019.htm">stated</a> that the contamination was “naturally occurring”. We have previously termed this the “miner’s myth” – the idea that contamination surrounding a mine is a product of <a href="http://link.springer.com/article/10.1007/s10653-016-9804-6">natural geology and weathering rather than the mining activity itself</a>.</p>
<p>Before Mount Isa Mines was taken over by Glencore in 2013, the company <a href="http://www.mountisamines.com.au/EN/Publications/Mine_to_Market/M2M_2012-10.pdf">admitted</a> that Mount Isa was affected by “industrial mineralisation” (industry-speak for contamination from emissions), but also said that the contamination was partly due to <a href="http://www.mcarthurrivermine.com.au/EN/Publications/Sustainability%20Reports/XZI%20240_Sustainability%20Report_v6%201_low%20res%20web%20version.pdf">natural sources</a> in the city’s soils and rocks.</p>
<p>We and our colleagues have produced more than 20 studies documenting environmental contamination and its management in the Mount Isa region, dating back to 2005 when the Leichhardt River, which supplies drinking water to Mount Isa, was found to be <a href="http://crcleme.org.au/Pubs/Monographs/regolith2005/Taylor_%26_Hudson-Edwards.pdf">contaminated with lead and other metals</a>. Since then, we have detailed contamination in local <a href="http://www.sciencedirect.com/science/article/pii/S0269749107002163">sediments</a>, <a href="http://pubs.rsc.org/-/content/articlelanding/2011/em/c0em00396d#!divAbstract">water</a> and <a href="http://www.sciencedirect.com/science/article/pii/S0883292710000740">soils</a>, and used <a href="http://www.sciencedirect.com/science/article/pii/S0269749113002455">isotope fingerprinting</a> to pinpoint the likely source; none of this research was mentioned in the new report.</p>
<p>Despite the welcome admission that the company is indeed contaminating Mount Isa, the report caveats this by saying that the risk of direct inhalation of lead emitted into the air is low. It states that exposure arises mainly when children are exposed to lead-contaminated surfaces in their homes – chiefly carpets. For Mount Isa families, these comments do not fully encapsulate the real challenges they face in protecting themselves and their families. </p>
<h2>Passing the buck</h2>
<p>The report offers the <a href="http://www.mountisamines.com.au/EN/sustainability/Documents/3_Lead%20Pathways%20Study%20Air%20Report%20-%20Community%20Brochure%20FINAL.pdf">following advice</a> to residents attempting to keep their exposure as low as possible:</p>
<ul>
<li><p>keep a “clean home environment”</p></li>
<li><p>consider replacing carpets with timber or other hard floors, and clean them with phosphate-based agents</p></li>
<li><p>wash childrens’ hands frequently and before meals, and encourage very young children not to suck non-food items</p></li>
<li><p>wash all homegrown fruit and vegetables, and peel root vegetables, before cooking and/or eating.</p></li>
</ul>
<p>The implied argument is essentially that, despite the contamination, if you do the right thing (such as keeping your house clean) there is no problem.</p>
<p>The obvious rebuttal to this is that if there were no industrial lead in the community, there would be no problem at all. The root cause of the issue is not the natural hand-to-mouth behaviours of children but the pervasive, persistent and permanent arsenic, cadmium and lead contamination that penetrates everything they touch: clothes, toys, food, floors and furnishings.</p>
<p>The rates of lead dust <a href="http://www.sciencedirect.com/science/article/pii/S0883292710000740">deposition</a> are such that that people living closest to the smelters would have to wash their backyards and indoor surfaces several times a day to keep toxic dust levels within acceptable guidelines. Cleaning one’s house more than once a day, especially if working or looking after little children, is nearly impossible to maintain even over a few days, never mind a lifetime. While the advice to keep houses, hands and surfaces is not unreasonable in itself, the <a href="http://onlinelibrary.wiley.com/doi/10.1002/14651858.CD006047.pub5/abstract">evidence suggests</a> that it is little use in preventing lead exposure.</p>
<h2>How serious is the exposure?</h2>
<p>Mount Isa’s schoolchildren are performing well below the national average, according to <a href="https://www.aedc.gov.au/data/data-explorer?id=62279">standardised testing data</a> from the first full year of school. Similar outcomes have been seen in <a href="http://www.sciencedirect.com/science/article/pii/S0269749115300841">Broken Hill</a>, another of Australia’s major <a href="http://theconversation.com/australian-children-exposed-to-toxic-mining-metals-do-worse-at-school-48343">lead mining</a> towns. Children in North Mount Isa, the area nearest the smelter, did worse than in other areas of the city.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/157477/original/image-20170220-15894-rd4axz.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/157477/original/image-20170220-15894-rd4axz.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/157477/original/image-20170220-15894-rd4axz.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=443&fit=crop&dpr=1 600w, https://images.theconversation.com/files/157477/original/image-20170220-15894-rd4axz.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=443&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/157477/original/image-20170220-15894-rd4axz.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=443&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/157477/original/image-20170220-15894-rd4axz.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=556&fit=crop&dpr=1 754w, https://images.theconversation.com/files/157477/original/image-20170220-15894-rd4axz.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=556&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/157477/original/image-20170220-15894-rd4axz.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=556&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Educational testing outcomes in children from various areas of Mount Isa, compared with the national average.</span>
<span class="attribution"><span class="license">Author provided</span></span>
</figcaption>
</figure>
<p>Mount Isa’s children have an average blood lead level of about <a href="http://www.leadalliance.com.au/wp-content/uploads/2016/09/MILHMC-Biennial-Report-2013-2016.pdf">35 parts per billion</a> – about three times <a href="https://www.cdc.gov/nchs/nhanes/">higher than normal</a>. A <a href="http://onlinelibrary.wiley.com/doi/10.1111/ajpy.12096/abstract">2015 study</a> of children from Broken Hill and Port Pirie showed that a increase in blood lead from 10 to 100 parts per billion can reduce IQ by 13.5 points. Relevantly, low exposures cause <a href="http://www.annualreviews.org/doi/abs/10.1146/annurev-publhealth-031912-114413">proportionally more harm</a>, which is why it is important for children to be protected from any lead contamination at all.</p>
<p>The <a href="http://www.mountisamines.com.au/EN/sustainability/Documents/2_UQ_Lead%20Pathways%20Study%20Air%20Report%20-%20Executive%20Summary%20FINAL.pdf">report</a> is clear that exposure happens as a result of contamination released into the air, which later settles as dust:</p>
<blockquote>
<p>The major source of lead exposure is via ingestion in the community and is from air particulates (<250µm diameter) that are on the ground from deposition as fallout.</p>
</blockquote>
<p>However, it goes on to say that the mine cannot be directly faulted for this, because the average rate of airborne emissions is within the guidelines outlined in its <a href="http://www.ehp.qld.gov.au/management/env-authorities/pdf/epml00977513.pdf">environmental permit</a>. The report suggests that its modelled blood lead values do not match the actual values on children because they may be exposing themselves to extra lead by ingesting dirt, or through other sources such as lead-based paint, leaded petrol, or lead-acid batteries.</p>
<p>But this rationale fails to take into account the short-term spikes in emissions, which cause depositions that accumulate in soils and dusts, which in turn cause elevated blood lead exposures in children. The question could easily be answered by comparing the isotopic composition of lead from blood samples with that from the mine’s emissions. Disappointingly, the Glencore report did not undertake this critical analytical step to link <a href="https://www.ncbi.nlm.nih.gov/pubmed/21329917">environmental sources to actual exposures in children</a>. </p>
<h2>Another setback</h2>
<p>Authorities have been aware of lead emissions from the Mount Isa smelter since the <a href="http://trove.nla.gov.au/work/34662826?q=Queensland+Parliament+Report+of+Enquiry+into+Lead+Poisoning+and+its+Incidence%2C+Mount+Isa&c=book&versionId=42926807">early 1930s</a>. It was always a fanciful notion to suggest that emissions were not finding their way across the city and into homes, and that the contamination was somehow natural.</p>
<p>Intensive air monitoring in the community has continued for at least the past 40 years. Blood lead surveys and <a href="http://www.sciencedirect.com/science/article/pii/S0883292710000740">internal memos</a>, along with <a href="http://link.springer.com/article/10.1007%2Fs11356-015-4100-z">environmental assessments</a> from various government agencies, have provided significant prior knowledge of the nature, extent and cause of the problem. In 2010, Queensland’s chief medical officer Jeanette Young <a href="http://www.theaustralian.com.au/news/investigations/the-toll-lead-takes-on-isas-infants/news-story/1efdd23c59204894cd5061877cb44ce8">told The Australian newspaper</a>: </p>
<blockquote>
<p>I do know the cause; it is emissions being released from the mine. If you think where it is coming from, it is coming from emissions from the smelter that are going up in the air and they are depositing across the town fairly evenly. </p>
</blockquote>
<p>Thus, in this sense, the latest study merely represents confirmation of what many people already knew.</p>
<p>Yet despite this overdue acknowledgement of the problem, the report implies that Glencore is not taking full ownership of the issue. The overriding message to Mount Isa’s residents is that it falls to them to keep themselves free from dangerous contamination.</p>
<p>In this sense, this is yet another setback in improving the living conditions for the community of Mount Isa, particularly young children who are the most vulnerable to the adverse and life-long effects of lead exposure.</p><img src="https://counter.theconversation.com/content/72862/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Mark Patrick Taylor is affiliated with: Broken Hill Lead Reference Group. LEAD Group Inc. (Australia). NSW Government Lead Expert Working Group - Lead exposure management for suburbs around the former Boolaroo (NSW) Pasminco smelter site, Dec 2014–ongoing. Appointed by NSW Environment Minister to review NSW EPA’s management of contaminated sites, October 2015–ongoing. Macquarie’s VegeSafe project receives funding support via voluntary donations from the public and cash and in-kind support for a broader evaluation of the use and application of field portable XRFs OIympus Australia Pty Ltd and the National Measurement Institute, North Ryde, Sydney. In addition, MP Taylor has previously provided evidence-based expert report and advice for Slater and Gordon Lawyers in regard to their court action against Mount Isa Mines.</span></em></p><p class="fine-print"><em><span>Chenyin Dong is funded by the international Macquarie University Research Excellence Scholarship (iMQRES) and New South Wales Environmental Protection Authority scholarship (MQ9201600680).</span></em></p><p class="fine-print"><em><span>Paul Harvey receives funding from a Macquarie University Research Excellence Scholarship (MQRES). </span></em></p>Glencore has admitted responsibility for air pollution in Mount Isa, but its latest report puts the onus on residents to minimise their exposure to lead contamination in their homes.Mark Patrick Taylor, Professor of Environmental Science, Macquarie UniversityChenyin Dong, PhD Candidate in Environmental Science, Macquarie UniversityDr Paul Harvey, Researcher of Environmental Science, Macquarie UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/487332015-11-10T19:22:50Z2015-11-10T19:22:50ZThe danger of stranded assets lurks for unwary coal producers<p>The prevailing mainstream commentary of the Australian coal sector is that its future is secure.</p>
<p>Any lost demand from China for Australian exports will be replaced by demand from India. Other growth markets such as South East Asia will also fill the gap. Shifts in demand for renewable energy are not material to the outlook. </p>
<p>But some key trends sketch out a different story.</p>
<p>In 2014, thermal coal use in China fell 2.9% on the previous year’s consumption. In 2014, the Chinese economy grew 7.4% and electricity production grew 3.8% via everything but coal: solar, wind, hydro, nuclear and biomass. In <a href="http://www.oxfordenergy.org/wpcms/wp-content/uploads/2014/12/CL-1.pdf">fact</a>, China’s coal fired power generation was down 3%.</p>
<p>Chinese coal imports dropped by 11% over 2014 and a further 38% in the first four months of 2015 due to the government prioritising sourcing coal domestically to assist local producers who are losing money, as well as the contractionary cycle. </p>
<p>Australian coal producers <a href="http://www.minerals.org.au/news/global_coal_boom_to_continue_says_minerals_council_of_australia">remain optimistic</a> though that demand from India will compensate. However this demand is unlikely to eventuate. In just a few years, India’s coal demand will be met by domestic sources and by 2017 they expect to stop importing coal altogether. They are also ramping up production of their renewable energy industry to transform the way India sources electricity. It is also important to note that many regional areas in India do not have grid infrastructure, and are therefore unable to benefit from coal-fired power generation without significant capital investment.</p>
<p>The recent International Energy Agency (IEA) <a href="http://www.iea.org/publications/freepublications/publication/WEO2015_SouthEastAsia.pdf">report</a> predicts South-East Asia coal demand will triple in the next 25 years and <a href="http://www.afr.com/business/mining/coal/australias-coal-exports-set-to-rise-as-southeast-asia-demand-surges-20151013-gk7sms?stb=twt">commentators are suggesting</a> that this changes the outlook for Australian producers. But South-East Asia represents 6% of world traded coal in 2014, so finding a small growth market will do nothing to offset the collapse in price in the main markets. Further, China, Japan and India are 50% of the world traded coal market and all three have peaked. That is why the coal price is down a further 20% this year.</p>
<p>Only a few companies are undertaking assessments of the risk of stranded assets, to understand the potential implications on their business. In October 2015, BHP Billiton produced a detailed <a href="http://www.bhpbilliton.com/%7E/media/5874999cef0a41a59403d13e3f8de4ee.ashx">analysis</a> assessing the possibility for reduced demand of their resources due to the transition to clean technology and the risks that climate change pose to its asset portfolio. </p>
<p>The report predicts the continuing climb of the world’s energy demand, in line with GDP growth. While this is historically the case, <a href="http://www.carbontracker.org/wp-content/uploads/2014/09/Coal-Demand-IEEFA.pdf">many countries are beginning to decouple</a> the two indexes. If these emergent trends continue, energy demand will still rise, but not as significantly as predicted.</p>
<p>BHP asserts that its coal assets will be safe due to their high quality and low price. This is also true, but the assessment doesn’t take into account the potential for governments to protect their domestic coal industries, avoiding imports, as China and India are doing.</p>
<p>BHP’s analysis of renewables is based around the assumption that uptake of renewables will be forced by government policy. The report does not consider that the continued drop in renewable technology prices will see deployment grow independent of subsidy and potential increase in growth rates, beyond historic trends. There is growing analyst consensus that there will be mass-market uptake of battery storage over the next five years. This is also predicted to dramatically increase the growth rate for deployment of renewables.</p>
<p>Last month, Bank of England governor Mark Carney <a href="http://www.bankofengland.co.uk/publications/Pages/speeches/2015/844.aspx">warned</a> that the vast majority of the world’s fossil fuel reserves could become stranded assets if scientist’s estimates on how we cannot afford to burn these reserves proved approximately correct. Many were surprised that a mainstream banker was articulating the view that this has the potential destabilise existing energy markets and shake up countries’ economies.</p>
<p>Mining and energy companies are starting to feel the pinch. Glencore is the story of the Titanic. In May 2015, they <a href="http://www.glencore.com/assets/sustainability/doc/sd_reports/2014-Sustainability-Report.pdf">assessed</a> their stranded-asset-risk at zero. Not 10%, or 1.5%, but no chance whatsoever. </p>
<p>Glencore is <a href="http://www.wsj.com/articles/glencore-shares-regain-more-lost-ground-1443688643?alg=y">now in financial trouble</a> due to a combination of too much debt, off balance sheet leverage and low resource prices, particularly coal. Six months ago the company told investors at the Annual General Meeting that there was “<a href="http://www.glencore.com/investors/shareholder-centre/agm/">no risk</a>” that its assets would become stranded. </p>
<p>Glencore’s grim financial situation and reasons for it shares some <a href="http://www.bloomberg.com/news/articles/2015-08-26/peabody-said-to-hire-lazard-as-adviser-for-debt-restructuring">similarities</a> to that of US coal mining company, Peabody Energy Corporation.</p>
<p>These company’s often irreverent attitude towards the risk posed by both climate change and renewable energy could be seen by investors as a proxy for how it approaches risk in all other aspects of their business.</p>
<p>In Queensland, the Adani Carmichael coal mine that has just been <a href="http://www.dilgp.qld.gov.au/assessments-and-approvals/carmichael-coal-mine-and-rail-project.html">approved</a> is another example of a coal project that is struggling with finance. Both <a href="http://www.smh.com.au/business/mining-and-resources/national-australia-bank-rules-out-funding-adanis-carmichael-coal-mine-20150902-gjdsfl.html">NAB</a> and the Commonwealth Bank <a href="http://www.smh.com.au/business/mining-and-resources/adani-and-commonwealth-bank-part-ways-casting-further-doubt-on-carmichael-coal-project-20150805-gisd1l.html">backed out</a> of funding roles in the project, and other big multinational financiers, such as JP Morgan, Deutsche Bank, Morgan Stanley and Citibank have said they will not invest. Many see the project as <a href="http://www.smh.com.au/business/mining-and-resources/adanis-carmichael-mine-is-unbankable-says-queensland-treasury-20150630-gi1l37.html">commercially unviable</a> and that given the macro trends around thermal coal, the sector is in structural decline.</p>
<p>It is understandable that companies want to keep their business outlooks positive and not spook their shareholders. It makes sense that they don’t wish to include the complex, knotty issues.</p>
<p>But these issues are why you employ sophisticated risk analysts and they make for a more balanced approach. These recent cases show that ignoring them doesn’t make them disappear.</p>
<p>The hope is that the industry will mature and start thinking in a more nuanced way about these risks. BHP Billiton’s report on this is a good start.</p><img src="https://counter.theconversation.com/content/48733/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jemma Green is a board director at Future Super and on the advisory board of Carbon Tracker.</span></em></p>Only a few coal producers are undertaking risk assessments about the danger of coal assets becoming “stranded”, or unviable.Jemma Green, Research Fellow, Curtin UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/487882015-11-09T03:55:39Z2015-11-09T03:55:39ZWhy dependence on natural resources is bad for the DRC<figure><img src="https://images.theconversation.com/files/100353/original/image-20151030-16519-f7pdbt.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Excavators and drillers at work in a copper and cobalt mine near Lubumbashi. Mineral resources are a big part of the DRC's economy. </span> <span class="attribution"><span class="source">Reuters/Jonny Hogg</span></span></figcaption></figure><p>Many African countries have in recent years shown phenomenal economic <a href="http://www.businessinsider.com/world-bank-fast-growing-global-economies-2015-6">growth</a>. But recent developments on global markets – including the drop in prices of commodities such as oil, copper, and cobalt – have <a href="http://www.ft.com/intl/cms/s/3/93d5c572-7bf6-11e5-a1fe-567b37f80b64.html#axzz3q3gZsCWo">raised questions</a> about the sustainability of Africa’s economic growth.</p>
<p>The instability of global market has lowered investors’ confidence, and led to questions being raised about the <a href="http://www.theguardian.com/business/2015/oct/07/risk-global-financial-crash-increased-imf-emerging-economies-eurozone-stability-report">health of the global market</a>. There is a feeling of uncertainty and fears of financial global crises, especially due to a slow down in <a href="http://fortune.com/2015/09/02/china-crisis-us-economy">China’s economy</a>. </p>
<p>The impact of the fall in <a href="http://www.economist.com/blogs/buttonwood/2015/07/commodities">commodity prices</a>, particularly minerals, is being felt in many countries around the world, including the <a href="http://www.aljazeera.com/indepth/opinion/2015/01/africa-oil-shock-economy-20151653236689289.html">Democratic Republic of Congo</a> (DRC). The DRC has been hit by the drop in the <a href="http://www.wsj.com/articles/glencore-shares-fall-on-copper-problems-1442253214">price of copper</a>. <a href="http://www.ft.com/intl/cms/s/0/3f1d9664-562f-11e5-a28b-50226830d644.html#axzz3q3gZsCWo">Glencore</a>, the Anglo-Swiss multinational commodity trading and mining company headquartered in Baar, Switzerland, is <a href="http://www.ft.com/intl/cms/s/0/3f1d9664-562f-11e5-a28b-50226830d644.html#axzz3qKpS0OKa">considering closing</a> some of its operations in Katanga province.</p>
<p>The DRC’s economy is driven by agriculture, mineral resources, manufacturing and services. Over the past decade, the agricultural sector has been <a href="http://www.afdb.org/fileadmin/uploads/afdb/Documents/Publications/Congo%20Democratic%20Republic%20Full%20PDF%20Country%20Note.pdf">declining</a> as the country’s major contributor to its GDP while commodities-related industries have been rising. The mining sector accounts for <a href="http://www.imf.org/external/pubs/ft/scr/2015/cr15280.pdf">one-quarter</a> of the country’s GDP.</p>
<p>Last year the <a href="http://www.africaneconomicoutlook.org/en/country-notes/central-africa/congo-democratic-republic/">economy grew</a> by nearly 9%, driven by the extractive and manufacturing industries, agriculture, commerce and construction, and a high export demand for raw material. Sustaining this growth has now been threatened by the dramatic fall in commodity prices. </p>
<p>In addition, there are fears of increased political instability as President Joseph Kabila is accused of attempting to <a href="http://www.economist.com/news/middle-east-and-africa/21671178-joseph-kabila-may-just-have-acquired-powerful-new-rival-presidents-old-ally-leaves">remain in power</a> beyond his second and last five-year term. </p>
<p>According to the <a href="https://www.imf.org/external/pubs/cat/longres.aspx?sk=43335.0">IMF</a>, the DRC:</p>
<blockquote>
<p>… remains a fragile country with vulnerabilities on the rise. </p>
</blockquote>
<h2>A shaking global economy with local impact</h2>
<p>Closing mines in the Katanga province would have a devastating impact, with severe social and economic consequences.</p>
<p>Thousands of workers and their families depend on the <a href="http://www.radiookapi.net/2015/10/23/actualite/economie/ralentissement-des-activites-de-kcc-la-crise-se-ressent-deja-kolwezi">mining industry</a>. Mine closures would result in a large job losses. The company <a href="http://www.ft.com/cms/s/0/3f1d9664-562f-11e5-a28b-50226830d644.html#axzz3q4L7cA5P">employs</a> an estimated 5000 people in Katanga without counting subcontractors.</p>
<p>New cities and communities have been established and sustained through mining. Small businesses have been created and new forms of commodities trade initiated by people living in the areas surrounding the mines. </p>
<p>The impact of mining houses shrinking their operations could cripple the DRC’s economy which is highly dependent on mineral exports. Up to <a href="http://atlas.media.mit.edu/en/profile/country/cod/">87.2%</a> of the economy is export oriented.</p>
<p>According to the OECD, the DRC’s exports were worth US$7.03 billion in 2013, making it the 103rd-largest exporter in the <a href="http://atlas.media.mit.edu/en/profile/country/cod/">world</a>. Refined copper accounted for one-third of all exports, followed by copper ore (19%), raw copper (7.5%), cobalt (8.8%), cobalt ore (6.9%) and crude petroleum 12%. </p>
<p>The country is therefore extremely vulnerable to commodity prices, or to drops in demand for minerals. The question that needs to be answered is: what should be done to avoid this permanent economic and social vulnerability? </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/100356/original/image-20151030-16542-1vsznxb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/100356/original/image-20151030-16542-1vsznxb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/100356/original/image-20151030-16542-1vsznxb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/100356/original/image-20151030-16542-1vsznxb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/100356/original/image-20151030-16542-1vsznxb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/100356/original/image-20151030-16542-1vsznxb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/100356/original/image-20151030-16542-1vsznxb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">An employee stands in an open pit at Banro’s Twangiza mine in eastern Congo.</span>
<span class="attribution"><span class="source">Reuters/Tom Kirkwood</span></span>
</figcaption>
</figure>
<h2>Diversification is key</h2>
<p>Many African countries, including the DRC, have for years maximised and concentrated their economic activities, at least at the macro level, in only one sector. </p>
<p>This lack of economic diversity and extreme concentration on one sector has never benefited the continent, and will never benefit the DRC. Diversification is key – not only for GDP, but for local economic development, small businesses and entrepreneurship.</p>
<p>In addition to this, the DRC relies heavily on <a href="http://www.state.gov/e/eb/rls/othr/ics/2011/157260.htm">Foreign Direct Investment</a> (FDI), mainly financial investment, at the expense of local capital investment. The country should not be depending almost exclusively on FDI to run its economy. Rather, local as well as national companies should be allowed to invest in strategic sectors such as farming, agriculture, transport as well as mining.</p>
<p>There are other policies the government could put in place. These include:</p>
<ul>
<li><p>The DRC should encourage and stimulate local investment and support start up businesses. Many of the economic or financial challenges that the DRC has known for many years are linked to economic <a href="http://freepolicybriefs.org/2011/11/21/are-natural-resources-good-or-bad-for-development/">dependency</a>. It is imperative that the government creates a friendly environment for citizens to invest in their communities and get all the necessary support to establish and grow their businesses in a safe economic space.</p></li>
<li><p>The country must accelerate local economic inclusion by taping into the potential of the informal market. A big part of small trades are conducted by women and youth in the <a href="http://www.african-bulletin.com/5920-drc-the-origins-of-the-informal-sector.html">informal sector</a>. These people constitute a class of informal entrepreneurs who, if supported financially and with the necessary skills and logistics, would be able to grow the economy and generate more jobs.</p></li>
<li><p>Strengthen interprovincial economic activities and integration based on small-scale economic activity and trade.</p></li>
<li><p>The role and place of women in local economic development needs to be considered and promoted.</p></li>
</ul>
<p>It is important to mention that many efforts need to be deployed to insure sustainability, growth, and development of the DRC. Political <a href="http://www.theguardian.com/global-development/poverty-matters/2013/sep/20/peace-stability-global-development-agenda">stability and peace</a> are also key for long-lasting economic growth and development.</p><img src="https://counter.theconversation.com/content/48788/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Yvan Yenda Ilunga does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The fall in commodity prices has hit the DRC hard. This is a lesson to resources-dependent countries in Africa that they need to diversify their economies.Yvan Yenda Ilunga, PhD Student, The Division of Global Affairs, Rutgers UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/483772015-09-30T04:25:43Z2015-09-30T04:25:43ZExplainer: Glencore and why analysts move stock markets<p>Mining giant Glencore, and its Australian counterparts Rio Tinto and BHP have today gained back some of the billions of dollars wiped off their market capitalisation this week following a <a href="http://www.standard.co.uk/business/glencore-may-be-worthless-says-investec-a2957141.html">negative research note</a> from a London-based analyst.</p>
<p>In his note, Investec mining analyst Hunter Hill reportedly wrote that if commodity prices remained at current levels, almost all of Glencore’s <a href="http://www.bloomberg.com/news/articles/2015-09-28/glencore-drops-to-record-low-as-investec-sees-value-evaporating">value could be wiped out</a> unless the company undertook a major restructure. In the hours following the <a href="http://www.smh.com.au/business/mining-and-resources/clearly-it-hit-a-nerve-the-surprised-analyst-who-sparked-a-55-billion-asx-selloff-20150929-gjxkcy.html">release of the note</a>, Glencore saw its shares plunge by 30%.</p>
<p>Stock market prices have long been recognised as being more volatile than is really justified by the underlying performance of the companies. Company profitability changes slowly but stock prices jump around every day.</p>
<p>There are many reasons for this excessive volatility. An important one to recognise is that the stock market is basically a market for second hand goods: the only way one can normally buy a stock is to buy it from an existing seller. So stock market volatility can be driven both by changes in the willingness of buyers to purchase and also by changes in the willingness of owners to sell. </p>
<p>Prices swing a lot because at the very time buyers are keen, thinking they have seen value in a stock, the existing owners suspect the value has gone up and hence are less willing to sell. Essentially supply goes down when demand goes up, causing a price spike. Equally at the very time when sellers want to unload stock, buyers flee the market.</p>
<h2>Perceptions and fear</h2>
<p>Both supply and demand then are driven by people’s perception of value. The main component of this perception is the actual performance of the company concerned. When people perceive that China might demand less steel, they expect this to lead to lower profit for iron ore producers, and hence mark down the value of the stock concerned.</p>
<p>One of the key roles of market analysts is to understand the businesses in the sector they focus on, to understand market conditions, to review the quality of management, etc, and to form a view on the fair value of a stock. Part of their role is to make markets operate more efficiently by revealing what they consider to be true prices. They convey this information to their clients, who then move to buy (or sell) the stock concerned, which leads to its price rising (or falling). Virtually all analysts will have at some time moved the market in a particular stock.</p>
<p>Of course when you or I see the price of the stock concerned rising (or falling), all we know is that someone has started to buy (sell) it. We do not have access to the particular analyst’s recommendation. Seeing the price move up we suspect that someone has done some analysis and realised it is under-priced. We infer that a price moving up means the stock concerned is undervalued, and a price moving down means it is overvalued, and buy or sell accordingly. This creates a momentum effect. It mainly involves uninformed investors following a trend. It can add to the wild gyrations of the market and its tendency to overshoot and undershoot. Automatic computerised trading can have similar effects.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/96722/original/image-20150930-19533-1nlofwh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/96722/original/image-20150930-19533-1nlofwh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/96722/original/image-20150930-19533-1nlofwh.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/96722/original/image-20150930-19533-1nlofwh.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/96722/original/image-20150930-19533-1nlofwh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/96722/original/image-20150930-19533-1nlofwh.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/96722/original/image-20150930-19533-1nlofwh.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Both analysts and investors exhibit herd-like behaviour.</span>
<span class="attribution"><span class="source">Image sourced from shutterstock.com</span></span>
</figcaption>
</figure>
<h2>Herd thinking</h2>
<p>Analysts are not immune to momentum effects. There is a fair bit of evidence that analysts tend to herd in the sense that their recommendations tend to move together. This can be explained by a human tendency to prefer not to be exposed as an outlier unless one is very sure of one’s prediction. It’s like the old adage that no one ever got sacked for buying IBM computers.</p>
<p>There is also <a href="https://books.google.com.au/books?id=b3osLtBsYqcC&pg=PA435&lpg=PA435&dq=analyst+performance+between+firms&source=bl&ots=X_S0IS3UeE&sig=wdOdrHREzB2TAirfbXw9rnG_dkM&hl=en&sa=X&ved=0CDYQ6AEwA2oVChMI6J3OpNidyAIVg6eUCh23pgE8#v=onepage&q=analyst%20performance%20between%20firms&f=false">evidence</a> that the performance of star analysts declines when they move to other businesses. They might be right a couple of times, whether because of skill or luck, but this outperformance does not usually persist over time or across employers. There is also a lot of evidence that fund managers who follow stock recommendations and invest consistently find it very hard to perform better than the market average for any sustained period.</p>
<p>Equity strategists play a similar role to analysts but focus on whole markets or market segments. Anticipating a fall in the Australian dollar, equity strategists will probably have suggested people move their portfolios from the resources sector to the retail, construction or banking sectors. Some will be bullish on emerging markets, some on the US, others look at currencies, and so on. Functionally they are doing the same sorts of things as stock analysts, just looking at investible categories rather than companies. And they can have similar impacts.</p>
<p>So, can analysts move markets? Yes, they can when they bring new information or additional insights to valuations. They perform an important role in pointing out mis-priced stock. There is much less evidence that they can do so consistently, and it is very difficult to make excess return from following the advice of even the best when trading costs are taken into account.</p><img src="https://counter.theconversation.com/content/48377/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Rodney Maddock does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Did one negative analyst note on mining giant Glencore really wipe billions off the markets?Rodney Maddock, Vice Chancellor's Fellow at Victoria University and Adjunct Professor of Economics, Monash UniversityLicensed as Creative Commons – attribution, no derivatives.