There can be short-term additional costs to what is called socially responsible investing but the longer term dividends are worth the effort, the author of this article says.

As readers can see, there is a growing interest – at least judging by the flurry of material sent to this publication – in socially responsible investment, a term that covers the idea of screening investments for “bad” firms or practices, or actively seeking out the “good” ones. These models should be distinguished from impact investing, where non-financial as well as financial returns in specific areas are sought. 

Certain parts of the world suffer from poor governance, weak or non-existent protection of vulnerable people, corruption and other problems. One such a place is the Democratic Republic of Congo in Africa. In this article, Alexander Machkevitch, co-owner of Luxembourg-headquartered Eurasian Resources Group, delves into the issues and some of the facts on the ground in DRC. As always, the editors at this news service are pleased to share such views with readers and invite responses. The editors don’t necessarily endorse all views from guest contributors. Email tom.burroughes@wealthbriefing.com

Davos 2018’s sobering theme of "creating a shared future in a fractured world" is, I believe, bang on target.

Take cobalt. Many people know this is a key metal in lithium ion batteries, powering our beloved smartphones, electric cars and other devices. What fewer people know is that many of these devices are tainted with cobalt produced by child labour.  

Some 60 per cent of the world’s cobalt reserves are found in the Democratic Republic of Congo (DRC).  While mainstream mining groups there adhere to the normal safeguards expected by consumers, so-called "artisanal" small scale producers mine cobalt using children as young as four.  

Analysts expect a 12-fold increase in lithium ion battery capacity is needed to meet consumer demands and the promise of a low-carbon economy. The market is likely to reach $100 billion by 2025. Batteries installed in homes and businesses will account for 57 per cent of the world’s energy storage capacity by 2040.    

Those of us at the sharp end, operating mines in some of the toughest regions of the world, in places where if you get bitten by the wrong insect you die, have a big role to play.  

Amnesty International’s recent demand for transparency on cobalt sourcing is a step in making corporations accountable for their suppliers’ behaviour and the impact this can have on entire generations. Taken together with the pressure asset managers face from their customers to invest responsibly and the G20’s commitment to eliminate child labour by 2025 and we can see how fast momentum is building.  

The same pressures that have brought us globalisation can also help bear down on the use of child labour – in this case the internationalisation of media, and consumer power.  As big-brand apparel producers have discovered, once consumers realise how their pound, dollar or euro is being used they rapidly start to vote with their wallets.

No consumer brand wants to suffer the financial and reputational impact of a buyers strike be it Apple, Zara or Japan Tobacco. The moment they realise the risk they are running they will spend the money to take back control of their supply chain.

While global trade has done wonders for consumer purchasing power and helping lift the poorest out of poverty, somewhere in the headlong pursuit of lower costs we have lost sight of our responsibility to our fellow citizens. As a global industry we should agree how to operate using a responsible value chain to supply the fast-growing battery market powering the technology and clean energy revolution.  

In recent months ERG and other established mining groups, with the support of UNICEF, Volkswagen, BASF and others set up the Global Battery Alliance to ensure a sustainable supply of raw materials and responsible practices.

Operating in this way has a short term cost impact but it will also give our customers reassurance about the provenance of our products.  As a society we are becoming more socially and environmentally conscious, as an industry, we must set our sights and standards accordingly.

About the author:

Alexander Machkevitch is chairman of the board of Directors of ERG S a r l Eurasian Resources Group, a Luxembourg-registered natural resources firm established in 1994. It says it is the world's largest ferrochrome producer by chrome content and a major producer of iron ore and alumina, with a workforce of more than 80,000 people. The firm has a significant presence in the Republic of Kazakhstan and Democratic Republic of Congo.