1. Engaging with investors in the mining and metals sector: Research Findings Aidan Davy, Claire White, Rory Sullivan www.icmm.com

2. Background www.icmm.com  Investors are starting to pay more attention to the mining and metals industry’s environmental and social performance.  In 2011, ICMM commissioned Dr Rory Sullivan to help ICMM and its members develop a better understanding of how investors view the industry’s performance on environmental and social issues.  This Briefing Pack presents the findings of ICMM’s research. The results are presented in three areas:  The coverage of the mining and metals industry in the responsible investment press.  The coverage of the mining and metals industry in the reports issued by responsible investment research organisations.  Investors’ views of the mining and metals industry’s social and environmental performance. Investors’ views on social and environmental issues are critically important to the mining and metals industry because of: The reputational implications for individual companies The reputational implications for the sector as a whole The potential for these views to influence investment decisions. More than 1100 investment-related organisations (including over 250 asset owners and 660 investment managers) have signed the UN Principles for Responsible Investment (as at 24 August 2012).

3. The ICMM Investor Focus Project www.icmm.com The ICMM Investor Focus Project involved:  A review of ICMM’s historic investment-related research and engagement with investors  Meetings with over 30 responsible investment organisations in Europe, North America and Australia: asset owners, asset managers, SRI research organisations, investor collaborations.  A review of mining and metals-related articles on the Responsible Investor website.  A review of the mining and metals-related reports published by SRI research companies. A Note on the Findings: There are some significant differences between the issues covered in the responsible investment press and in responsible investment research reports, and the issues that were identified by investors as being of importance to them. These should not be interpreted as implying a divergence in views but rather as reflections of (a) the different roles that the press, research organisations and investors play, (b) the research methodology (in particular the focus of the investor interviews on wider social and environmental issues, rather than ‘today’s controversies’).

4. Press coverage 1 www.icmm.com Analysis based on all articles relating to the mining and metals-related articles posted on the Responsible Investor website (http://www.responsible-investor.com/) from 1 January 2011 to 20 January 2012. In total 74 articles were found.http://www.responsible-investor.com/ Positive articles included:  Comparisons of the mining and metals industry’s reporting and/or performance with other sectors.  Industry statements (e.g. support for EITI).  ICMM reports/publications

5. www.icmm.com Press coverage 2 Note: Articles referring to AGMs primarily related to US companies (where the use of shareholder resolutions is much more common than in Europe).

6. Responsible investment research reports www.icmm.com We identified 19 responsible investment-related reports on the social and environmental performance of the mining and metals industry that were published in 2011. Notes: 1.A number of reports covered multiple subjects. 2.The reports that compared the mining and metals industry to other sectors tended to be quite positive about the sector. This reflects the fact that many of these reports were benchmarking management systems, processes and reporting, all of which are areas where the mining and metals industry has focused significant attention.

7. Interviews with responsible investment organisations 1 www.icmm.com Over the period January-August 2012, ICMM held over 30 meetings with key responsible investment organisations - asset owners, asset managers, SRI research organisations, investor collaborations - in Europe, North America and Australia. While there are differences in the importance that investors assign to specific social and environmental issues, and in the manner in which investors use social and environmental information, four core themes emerged from the investor meetings:  Effectively managing social and environmental issues is an integral part of delivering high quality mining projects.  Investors expect companies to be aware of social and environmental risks, to have appropriate policies, systems and controls in place to manage these risks, and to report on performance.  Investors have more confidence in companies that have good risk management systems and provide high quality disclosures on their social and environmental performance.  While certain issues (e.g. health and safety, climate change) are routinely considered in investment research, there is on-going discussion about how social issues (e.g. human rights) can be incorporated into investment models and decisions.

8. Interviews with responsible investment organisations 2 www.icmm.com There was a broad consensus around the social and environmental issues that investors are most concerned about:  Environmental: water, tailings disposal, oil sands.  Social: Free prior informed consent (FPIC), human rights and security, operations in conflict zones.  Economic: revenue transparency, local economic development.  Governance: relationships with junior mining companies, remuneration. While responsible investors generally focus on overall corporate responsibility (or social and environmental) performance, they are disproportionally interested in projects that are particularly challenging or risky.

9. Interviews with responsible investment organisations 3 www.icmm.com Performance  Environmental and social performance is recognised as an integral part of the industry’s social licence to operate.  The mining industry is seen as having significantly improved its performance over the past ten years, in particular in relation to health and safety, environmental management, security and human rights, and the strategic use of social investment.  On-going areas of concern include: community relations, climate change (mitigation and adaptation), resource curse, bribery and corruption. Reporting While reporting by ICMM member companies is generally recognised as high quality, there are areas where reporting falls short of what investors expect:  Controversial projects.  Outcome-based reporting.  Governance mechanisms (e.g. grievance processes).  Relationships with junior mining partners.  Safety, in particular underlying causes and actions taken to prevent recurrences.  Stakeholder views.

10. For further information please e-mail us at: Aidan Davy (aidan.davy@icmm.com)aidan.davy@icmm.com Claire White (claire.white@icmm.com)claire.white@icmm.com Rory Sullivan (rory@rorysullivan.org)rory@rorysullivan.org www.icmm.com