Saturday, June 5, 2010

Tradewinds, Gates Foundation, and Black Gold: Follow the Money

“A commitment to excellence in all that we do.”
“Integrity and respect in our dealings with our clients, colleagues and business partners.”

These are a few of the principles promoted by Tradewinds Global Investors. With a reported $27.6 billion of assets under management, I was intrigued by these principles in light of the places where Tradewinds’ “integrity” has placed their money. The reasons I found Tradewinds Global Investors interesting is both their stated Core Values and the company they keep. Their reported positions include two notorious environmental nightmares – BP (NYSE:BP) and Barrick Gold (NYSE: ABX), one of the major owners of the Allied Gold (ASX: ALD; AIM: AGLD).

In fairness, I should point out that a current review of BP’s ownership includes quite an interesting fraternity including: Wellington Management Co., State Farm, T.Rowe Price, Bill and Melinda Gates Foundation, Vanguard Funds, Fidelity Diversified International and several banks. Wellington, Fidelity and State Farm share the fraternity of owning Rio Tinto (NYSE: RTP) along with TD Asset Management. Under another arm of TD – this time TD Securities - Barrick’s ownership fraternity includes Blackrock and Capital Research Global Investors.

As we approach the 50 day mark on the BP oil spill, I wonder if anyone finds it ironic that Nautilus Minerals (TSX: NUS), at their May presentation to the Offshore Technology Conference in Houston TX celebrated the “minimal” impact risk of offshore extraction. They proudly announced that, “Nautilus Minerals Inc ("Nautilus") is following the lead by the offshore oil and gas industry to tap vast offshore resources.”

As I sit here in Ulaanbaatar, Mongolia, I find myself amused by the observation that the Capital Market System that appears to be failing at present, if the truth be told, really never worked at all. You see, somewhere between 401(k)s, insurance and bank reserves, stock exchanges, and operating businesses, we made it o.k. for people to assume that they’re making investments which, in turn, build wealth. However, what we’ve really done over the past several decades (at least) is insulate those who are “building wealth” from any visibility into the costs of that wealth. While residents of the Gulf coast in the U.S. are rightfully upset as millions of gallons of oily sludge wash up on their beaches, are any of them connecting the dots and demanding that their retirement fund managers STOP pouring money into companies that operate in a careless fashion, indifferent to ecosystems in the interest of making the bottom line as fat as possible?

In an era where we hear about “financial reform” and “increased transparency” in the capital markets, where are the calls for stock exchange regulators to assist the public in getting to the truth about how their profits are being derived? And you, the reader, where are you in demanding that your investment intermediaries actually abide by their lofty public relations and marketing “core values” while they continue to support companies who operate with indifference to humanity and the ecosystem? When Warren Buffet has the audacity to dismiss the economic crisis as an undetectable market anomaly (save for, in his words, “a few Cassandras”) where is the U.S. Congress’ or the White House’s resolve to actually inquire of the Cassandras as to where, when and why they saw the big one coming?

You see, I think that we’ve gotten lazy. And worse than that, I think we’ve decided that our comfort – built on an illusion of our insular, sterile world – is more important than actually finding out from whence our comfort comes. I think that we’ve gotten quite content to let our discount electronics consumption ride on the now suiciding labor force in China where working conditions are so detestable that employees find killing themselves more desirable than making the next HP or Apple product - a situation that Steve Jobs reportedly finds "very troubling." Really?

I had the chance to meet with some of the community development team of Rio Tinto’s mining operations here in Mongolia. While many people mistake me for just another activist opposed to extraction on principle, what we did this week is to have a discussion about how things could be changed here so that mining and social values could co-exist. Am I convinced that the ground water will be more preserved, that communities will gain greater benefit, or that the environment will be spared? Not yet. But what I did reconfirm is that when people sit down and learn from each other – actually listening and conversing – productive steps are possible. More importantly, I confirmed that, if an average human being actually wants to gain more visibility into what a company is doing, it’s possible. It involves getting off your couch and going to see the impact that your money is making.

I don’t know the folks at Tradewinds. I have no idea whether they are indifferent to human values or whether they’ve just made investment decisions based on quantitative inputs in impersonal matrices. I don’t know if they’ve spent time on the Gulf coast helping clean up the oil spill or whether they’ve been pressuring BP to still declare a dividend and get on with making money. I don’t know if they’ve seen the villages displaced by Mark Caruso’s water diversion in Simberi (Allied and Barrick Gold) which has turned the airport into a flood plain and has turned local gardens into swamps. I don’t know if they know that their “community relations” budget included the employment of mercenary paramilitary assets to deal with community relations. But I do know this. If we are ever going to turn around the insanity that blights our current state of humanity, we better get involved in who is putting our money wherever it’s going.

Any of you who want to ask specific questions about where your money is being invested and who are willing to do so in the comment section of this blog, I will be more than happy to share with you my experience on the ground (and invite others to do the same). Even a gold mine can operate with ethical principles if those who put their money into it make “all-in” value a priority for management. We can do better, and for the sake of the world, we must. While we watch China expand its reach over the control of the world’s resources, we can lay the foundation for earning the accountability that we’ve neglected far too long. If we wish to have any moral authority to offer commentary on what has already been behavior defined by expediency, we better earn that voice.

Wake up!


1 comment:

  1. Hi David - great analysis - who/anyone providing the deep look at where the money is going, so that investors can be properly informed? Cheers, Kevin Hansen


Thank you for your comment. I look forward to considering this in the expanding dialogue. Dave