Sustainable International Investment: Introducing CCSI’s Mission and Activities
description
Transcript of Sustainable International Investment: Introducing CCSI’s Mission and Activities
Sustainable International Investment: Introducing CCSI’s Mission and
ActivitiesJune 2014
Established in 2008 as a joint Center of Columbia Law School and the Earth Institute
Mission of CCSI: To develop and disseminate practical approaches and solutions to maximize the impact of international investment for sustainable development.
FDI can contribute to sustainable development, through the transfer of capital and technology, job creation, linkages with local industries, infrastructure development and capacity building
Extent to which these benefits actually accrue to host countries depends heavily on the policies of the host country and the investors, and the institutions available to find mutually satisfactory outcomes for both.
Columbia Center on Sustainable Investment (CCSI)
Promotes practical approaches and solutions to critical development issues through research, education, events, and projects in Africa, Asia, and Latin America.
A multi-disciplinary approach integrates expertise in international law, investment, land/agriculture, human rights, and extractive industries with diverse fields of sustainable development.
Workstreams include investment in natural resources and sustainable development (including land, oil, mining, and gas); international legal regimes (the implications of treaties and arbitration for sustainable development); emerging market multinationals; and other trends and developments in foreign investment.
Columbia Center on Sustainable Investment (CCSI), cont.
INVESTMENTFRAMEWORKfor Long TermInvestment andSustainableDevelopment
Equitable
Transparent
Cooperative
This guiding principle is
especially important for
extractive industries, given the
size of the investments, the
duration of the projects, the
complicated settings in which
the investments take place,
and the potential impacts.
Efficient
Our goal: a context-specific, multi-stakeholder, and multi-sector investment and development framework, linking governments, extractive companies, civil society, donors and local communities.
CCSI- Guiding Principles
Extractive industry investments can be win-win investments for governments, companies and
communities…
Potentially transformative opportunities: Long-term partners (investments are often for many decades) Major infrastructure and supply chain needs with potential
spill-over effects Profitable projects while generating billions of dollars of
revenue for governments Potential for domestic use of the resources (downstream
potential) Potential linkages to local services Opportunity for technology transfers Increasing recognition that extractive industries can
be a key driver for long-term growth
Extractive Industries and Sustainable Development: WHY?
Pre-existing governance constraints and development challenges
Asymmetry of information Confidentiality Threat of the “resource curse” Volatility of revenues Resources are non-renewable Extractive projects can be treated as enclave sectors Resettlement and land rights disputes Potential environmental impacts Historical records of human rights and environmental
shortfalls Highly politicized at times Complex web of stakeholders with differing interests
Extractive Industries and Sustainable Development: Special Challenges
Dependence on Extractives Increasing
OPM 2011
Challenges and opportunities for resource-based development
Encouraging all stakeholders to adopt a longer-term perspective
‘Leveling the playing field’ in terms of information, resources, capacity,
Distilling good practices, optimal linkages, successful models, etc…
Implementing regulations that improve standards, accountability, access to justice and remedies
Potential for short term consequences
Santa Ana – Silver Mine (Peru) / Bear Creek Mining 10,000+ protestors respond to development of Santa Ana Silver Mine Asset represents 20% of Bear Creek silver reserves - $96 mm invested
to date June 24, 2011 – Peruvian government annuls mining concession Market Response: $311 mm decline in market capitalization (43%
decline)
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
Jan-11
Feb-
11
Mar-1
1
Apr-1
1
May-1
1
Jun-11
Jul-11
Aug-1
1
Sep-1
1
Oct-1
1
Nov-1
1
May 9 June 24Gov't Annuls Mining Concession
BlockadesInitiated
Bear Creek Mining – 2011 YTD Share Price
Brainstorming Session
What issues need to be addressed to maximize the benefits and minimize the costs of extractive industry investments?
Five-pillar Framework
Sustainable
Investment in
Extractives
Legal Framework
Planning & Revenue
Management
Leveraging Linkages
Integrated Development & Human
Rights
Environmental
Management &
Protection
Pillar 1 – A Transparent and Mutually Beneficial Legal Framework
Increased capacity on auditing, financial modeling and contract negotiation
Active, broad, inclusive, and detailed Extractive Industry Transparency Initiative and mandatory payment disclosures
Use of innovative, flexible fiscal mechanisms that balance investors’ needs for a fair return with governments’ need for a fair value for their resources
Balanced fiscal and non-fiscal benefits in legislation and contracts
A transparent and mutually beneficial legal framework that enables a stable and predictable investment climate, maximizes benefits for host populations, and minimize the risk of disputes includes:
Contract Transparency encourages a fair deal and clear allocation of responsibilities
Collaborative action to combat tax evasion, havens, and transfer mispricing
Increased transparency and capacity around investment treaties and investor-state dispute settlement
Disproving that Transparency Hurts Valuation
Transparent companies: 17 companies that disclosed payments on a country-by-country basis in 2010
Non-transparent companies: 17 companies that are either EITI or GRI supporters but do not disclose payments on a country-by-country basis
Return on Equity
Return on Investment
Price-Earning Ratio
0.00 5.00 10.00 15.00 20.00 25.00 30.00
14.51
10.29
29.24
12.85
8.77
21.23
Average of Selected Ratios in 12/31/ 2010.
Non-Transparent Companies Transparent Companies
Pillar 2 - Resource-based Development Planning and Revenue Management
Long Term Developm
ent Strategy
Identify public investment priorities and break down the long-term development strategy into medium-term plans
Setup revenue management system to smooth expenditure
Align the budget with development priorities Ensure budget
and procurement transparency (including of resource revenues)
Coordinate donor and private sector activities with national development priorities
Snapshot of Timor-Leste
Petroleum Fund
Over ESI
Infrastructure Fund
Human Capital
Development Fund
ESI Domestic Revenue
Tran
spar
enc
y
Long
term
st
rate
gy
Fiscal Framework
Pillar 3- Leveraging Mining Investments for Sustainable Development
Opportunities to create economic and infrastructure linkages from the extractive sector:
Investment in vocational
training
Planning for synergies and
shared platforms
Sound regulatory framework for open access
infrastructure
Upstream and Downstream
linkages
Economic Diversification Mining
Investments’ needs
Pillar 4 – Integrated Rural Development (IRD) and Human Rights
Agri-business Alliance to support smallholder agriculture (including agricultural extension services)
Strategies and approaches to protect and promote Human Rights of affected communities during all phases of the project
Local development plans to help companies identify appropriate and sustainable points of entry, to ensure companies are complementing, not replacing, local government
Early community engagement through discussions, negotiations and agreements
Pillar 5 – Managing Environmental and Climate Risks
Managing climate risks and realizing opportunities Identify primary (exogenous)
environmental risks in the regions so that companies’ programs can be tailored and proportional to the risk
Coordinate public, private, and NGO or donor-funded conservation, rehabilitation or adaptation projects to maximize the effectiveness of each
Managing climate risk with strategies to reduce rainfall-induced production variability
Cumulative Environmental Risk Management System Assessing cumulative environmental
impacts of mining operations
Expanding the Cumulative Impact Assessment to include competitive land and water uses and inform policy
Facilitating coordination among public and private initiatives
Summary
The responsibilities for resource based development are shared among companies, national governments and local governments, with critical roles for civil society, donors, NGOs and academia
Corporate Social Responsibility must be partnered with good governance: strategic medium-term planning, sound resource management, and effective partnerships.
At each stage, planning, transparency and cooperation in the process are critical for realizing the mutual benefits for both companies and governments.
Collaborative efforts to leverage extractive industries for development in new (and existing) producing countries should reflect the following:
Group Exercise
What role do you see extractive industries playing in your region?
What are the challenges and opportunities related to resource-based development?
5- P
illar
Fr
amew
ork
1) Legal Framework
2) Planning and revenue
management
3) Leveraging Linkages
4) Integrated Development
5) Environmental management and
protection
Medium-term planning, a public investment strategy, strategic resource management, and effective budgetary mechanisms and execution.
Multi-stakeholder management of the cumulative environmental risks, impacts and challenges associated with resource extraction and development.
Leveraging the extractive industry investments for infrastructure expansion, vocational training, upstream and downstream linkages in line with development objectives.
An integrated development strategy to ensure that the population benefits from the extractive industries both during and beyond the life of the project.
A transparent, legal and fiscal framework for extractive investments, mutually beneficial to industry and the host country.
Applying the five-pillar framework to your region
WHAT RESOURCES DOES YOUR REGION HAVE?
WHICH ARE THE MAJOR COMPANIES OPERATING IN YOUR COUNTRIES?
[NAME OF REGION]
[Noteworthy features of the legal/fiscal framework]
[Is the legal/fiscal framework investment friendly?]
[How is the relationship between investors and the government?]
[Are the contracts public? Are the laws accessible?]
[Have there been recent developments in the legal/fiscal framework?]
Transparent and Mutually Beneficial Legal and Fiscal Framework
[Are there resource or sovereign wealth funds in the region?]
[How are the revenues spent?]
[Is there transparency in resource allocations?]
[Is there revenue sharing with communities or sub-national regions?]
[Is there a national strategy to leverage the extractive industries for development?]
[Is there regional cooperation among national governments?]
Long-term Planning and Revenue Management
[What have been the employment impacts of extractive industries in your region?]
[Are there linkages programs? Has a supply chain developed?]
[What is the state of the infrastructure and infrastructure needs? Of the investors? Of the government?]
Leveraging Extractive Industry Investments
[What are the development needs of the communities near the extractive industries? What about other communities in the country?]
[Are there tensions at the local level?]
[How active and engaged is civil society?]
Integrated Rural and Community Development
[What are the major environmental concerns in the region?]
[Are there environmental policies to protect the environment? Are they monitored and enforced?]
Environmental Management
Fundamentals for
understanding the
extractive industries
Legal framework
Fiscal Framework
Revenue Management
and allocation
Long term planning
Transparency and
accountability
Infrastructure Linkages
Community Impacts
Integrated rural
development
Environmental
Management
Course overview
Wiki Instructions
Login to the Wiki using the ‘Sign in’ in the top right corner.
Use the navigation pane on the left side and go to ‘Syllabus and Files’
Click on ‘Day 1 – June 9 – Introduction to the Extractive Industries and Sustainable Development’
Download the ‘Intro and 5 Pillars’ presentation To upload the completed presentation:
Click on ‘Edit’ and the select the ‘File’ icon. Attach and upload the presentation.