Gold: Is there a Socially Responsible Option?
In a time of trade wars and political leaders on the fritz, investors may consider more conservative options to avoid market volatility. Real estate, bonds, and even gold might look appealing in times of turmoil. For socially responsible investors with even a cursory awareness of the gold mining industry, however, the question of whether gold holdings are compatible with human rights and environmental protection is urgent and important.
No Dirty Gold is an advocacy group of nonprofits and companies in industries that use gold. The group supports voluntary improvements in environmental and social practices by the industry. According to the group, the mining of gold for a single wedding ring creates twenty tons of highly toxic waste, including mercury and cyanide used for refinement—and that’s a conservative estimate. As a result, large-scale gold mining kills life in streams and rivers and poisons entire communities downstream, as well as the miners themselves.
According to No Dirty Gold, it is possible to significantly reduce the waste and toxicity through better practices. These improvements can be strengthened through third party verification that provides consumers with information. For the rigorous SRI investor, however, verification has its limits, since much of the trading around precious metals is in the form of commodities. In addition to speculation, commodity trading creates another layer between the investor and the gold itself—resulting in decreased accountability.
The 2010 Dodd-Frank act contains a provision that requires publicly traded companies using “conflict minerals” (including gold, tungsten, tantalum, and tin) mined in the Democratic Republic of Congo to report on their sourcing to ensure they are not funding civil conflict in the eastern region of the country. While the legislation has reduced the mining of tungsten, tantalum, and tin, it has also led to some unintended consequences—including armed groups turning to gold due to its ease of transport. According to some reports, these groups have been increasingly using gold to finance themselves since 2010.
In February of 2017, President Trump threatened to suspend section 1502 of Dodd-Frank and restructure other important aspects of the legislation. The law requires companies to show that they are making efforts to not fund armed groups or inadvertently fuel human rights abuses (it does not require them to stop sourcing from the eastern DRC). Since it does not require any action to be taken beyond reporting, socially responsible investors consider the provision to be only a preliminary step; still, any rollback would be detrimental. A more stringent set of guidelines for companies (and investors) is the United Nations five-step framework: Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Area.
What are actionable steps we can take as consumers? One option is to use our purchasing power to support groups that are taking vigorous action on ethical sourcing—and avoid spending with companies that turn a blind eye to these issues. The Responsible Minerals Initiative is a good resource for information on the technology industry, and the “Gold Star List” by No Dirty Gold provides guidance on gold.
In addition, we can support the use of recycled gold, which reduces the demand for newly mined gold, as well as more efficient metals recycling. Most of our computers, phones, and other tech devices have gold in their circuitry; careful and more responsible metals recycling could make a large dent in the demand for mined gold. As socially responsible investors, we have opportunities to work with companies to better their reporting and practices on conflict minerals, including gold. Advocating for and investing in more closed loop manufacturing, increased recycling of technology devices, and simultaneous avoidance of speculative precious metal commodity trading are all ways to take action on this topic.