Sustainable International Investment: Introducing CCSI’s Mission and Activities

1. Sustainable International Investment: Introducing CCSI’s Mission and Activities June 2014

2. Columbia Center on Sustainable Investment (CCSI) • 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.

3. Columbia Center on Sustainable Investment (CCSI), cont. • 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.

4. CCSI- Guiding Principles Cooperative INVESTMENT FRAMEWORK for Long Term Investment and Sustainable Development 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. Transparent Equitable Our goal: a context-specific, multi-stakeholder, and multi-sector investment and development framework, linking governments, extractive companies, civil society, donors and local communities. Efficient

5. Extractive Industries and Sustainable Development: WHY? 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

6. Extractive Industries and Sustainable Development: Special Challenges • 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

7. Dependence on Extractives Increasing OPM 2011

8. 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

9. 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) Bear Creek Mining – 2011 YTD Share Price

10. Brainstorming Session • What issues need to be addressed to maximize the benefits and minimize the costs of extractive industry investments?

11. Five-pillar Framework

12. Pillar 1 – A Transparent and Mutually Beneficial Legal Framework 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 Balanced fiscal and non-fiscal benefits in legislation and contracts Use of innovative, flexible fiscal mechanismsthat balance investors’ needs for a fair return with governments’ need for a fair value for their resources Active, broad, inclusive, and detailed Extractive Industry Transparency Initiative and mandatory payment disclosures Increased capacity on auditing, financial modeling and contract negotiation Collaborative action to combat tax evasion, havens, and transfer mispricing Increased transparency and capacity around investment treaties and investor-state dispute settlement

13. 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

14. Pillar 2 - Resource-based Development Planning and Revenue Management

15. Snapshot of Timor-Leste Fiscal Framework Long term strategy Transparency

16. Pillar 3- Leveraging Mining Investments for Sustainable Development Economic Diversification Mining Investments’ needs Opportunities to create economic and infrastructurelinkages from the extractive sector: Upstream and Downstream linkages Planning for synergies and shared platforms Investment in vocational training Sound regulatory framework for open access infrastructure

17. Pillar 4 – Integrated Rural Development (IRD) and Human Rights • Early community engagementthrough discussions, negotiations and agreements • Local development plans to help companies identify appropriate and sustainable points of entry, to ensure companies are complementing, not replacing, local government • 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

18. Pillar 5 – Managing Environmental and Climate Risks Managing climate risks and realizing opportunities 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 • 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

19. Summary Collaborative efforts to leverage extractive industries for development in new (and existing) producing countries should reflect the following: • 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.

20. Group Exercise • What role do you see extractive industries playing in your region? • What are the challenges and opportunities related to resource-based development?

21. Applying the five-pillar framework to your region • A transparent, legal and fiscal framework for extractive investments, mutually beneficial to industry and the host country. • Medium-term planning, a public investment strategy, strategic resource management, and effective budgetary mechanisms and execution. • 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. • Multi-stakeholder management of the cumulative environmental risks, impacts and challenges associated with resource extraction and development.

22. [NAME OF REGION]

23. Transparent and Mutually Beneficial Legal and Fiscal Framework

24. Long-term Planning and Revenue Management

25. Leveraging Extractive Industry Investments

26. Integrated Rural and Community Development

27. Environmental Management

28. Course overview

29. 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.