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Norway’s sovereign wealth fund drops major Brazil miner, utility from its portfolio

The Pataxó Hã-hã-hãe indigenous group lives in Brumadinho’s neighbor city, São Joaquim de Bicas, which was downstream from the Vale dam break and impacted by it. They say that the toxic mining tailings have “killed” the Paraopeba River, which provided food for the community. Image by Lucas Hallel/FUNAI.

  • Norway’s sovereign wealth fund, the world’s largest, has put Brazilian mining titan Vale and the utility giant Eletrobras on its exclusion list.
  • The decision is a major blow to the two companies and a signal that European investors are taking a hard line against Brazil’s backsliding on environmental protections.
  • Vale was excluded for “serious environmental damage” and Eletrobras for contributing to “serious or systematic human rights violations.”

Norway’s Government Pension Fund Global (GPFG) has excluded two of Brazil’s largest energy companies from its portfolio, the fund’s executive board said last week. The decision to divest from mining giant Vale and Eletrobras, Latin America’s largest utilities company, follows a recommendation by GPFG’s ethics council, which found that the two companies had violated the fund’s environmental and human rights rules.

GPFG is the world’s largest sovereign wealth fund, with more than $1 trillion in assets. The fund also announced that it would no longer invest in five other companies that had either caused “severe environmental damage” or failed to adequately cut greenhouse gas emissions.

Rainforest Foundation Norway praised the move, saying it could “trigger a wave of divestment by investors internationally.” The GPFG had held a roughly 1% stake in the two Brazilian companies as of the end of 2018 before selling its positions in recent months.

“We see that a lot of international capital is leaving Brazil currently because of the deterioration of public policies for environmental and human rights protections,” Vemund Olsen, senior adviser at Rainforest Foundation Norway, said in an interview with Mongabay.

Including the new additions, there are now 142 companies on GPFG’s exclusion list. The fund’s guidelines list a number of ways that companies can land on the list, including complicity in serious human rights violations, excessive reliance on thermal coal, environmental damage, and corruption.

Vale is one of Brazil’s largest private companies and until recently was the world’s top iron ore producer. The multinational giant was excluded from GPFG’s portfolio after a catastrophic dam collapse in southeastern Brazil killed at least 259 people last year. The disaster was the company’s second in five years, with a similar dam engineering failure killing 19 and flooding the Doce River with 50 million tons of toxic mud in 2015.

Last year’s dam collapse, which was captured on video, released more than 10 million tons of mining waste and wrecked sections of the nearby town of Brumadinho. The incident caused a furor in Brazil after an investigation revealed that Vale had ignored warnings about safety concerns at the dam and deceived regulators about the risk of a collapse.

In January, Brazilian prosecutors charged 16 people with homicide in relation to the disaster, including Vale’s former chief executive as well as a number of senior corporate officials.

Eletrobras, which is owned by the federal government of Brazil, was placed on the list because of “unacceptable risk that the company contributes to serious or systematic human rights violations.” The company owns nearly half of the controversial Belo Monte dam and controls the consortium of investors that backed the project.

The Belo Monte dam was troubled from its inception, plagued by engineering problems and the subject of a global campaign to halt construction over its impact on the Xingu River ecosystem and indigenous communities living nearby. In 2015, the Federal Public Ministry of Brazil took Eletrobras and the other members of its consortium to court over the dam, accusing the project of “ethnocide” and the destruction of indigenous livelihoods in the region.

Mongabay has visited Belo Monte to report on the dam’s impact and the aftereffects of its construction.

In 2016, accusations surfaced during Brazil’s “Car Wash” scandal that the then-ruling Workers Party had taken kickbacks from companies involved in constructing the dam. Despite costing nearly $10 billion, most of it funded by Brazilian taxpayers through the country’s national development bank, the dam has only managed to generate a fraction of its promised power output, leading to questions about its financial viability.

In a May 18 letter to the GPFG, Eletrobras denied involvement in human rights violations at Belo Monte and asked the fund to reconsider its decision to divest, saying it was based on “inaccurate and outdated information.”

The GPFG’s decision to divest from the two comes as Brazilian President Jair Bolsonaro has found himself at odds with European leaders over his government’s efforts to reverse environmental protections in Brazil. Bolsonaro has a record of inflammatory anti-indigenous rhetoric, and last year he and French President Emmanuel Macron became embroiled in a heated public dispute over fires in the Amazon rainforest.

Olsen says he hopes that other investors will follow suit, and that the GPFG’s decision will be taken as a warning to Bolsonaro’s government that shredding protections for the environment and indigenous groups will come with a price.

“The companies that are dependent on access to European markets are really stressed out because of all the attention on the lack of policies and enforcement of environmental regulations. We think that’s the only way the government will change, because they don’t listen to environmental organizations anymore, they only listen to business,” he said.

Banner image: The Pataxó Hã-hã-hãe indigenous group lives in Brumadinho’s neighbor city, São Joaquim de Bicas, which was downstream from the Vale dam break and impacted by it. They say that the toxic mining tailings have “killed” the Paraopeba River, which provided food for the community. Image by Lucas Hallel/FUNAI.

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