Reprisk Special Report the Most Controversial Projects of 2014

ESG Business Intelligence

RepRisk Special Report The Most Controversial Projects of 2014

April 2015 Foreword from the CEO

I am pleased to announce the release of our Most Controversial Projects Report (MCP Report), which focuses on the projects – such as mines, ports, factories, and travel and leisure complexes – that were most exposed to environmental, social and governance (ESG) risks in 2014.

The MCP Report illustrates the kind of ESG-related risk incidents that can have an impact on project finance, underwriting, investment and supplier-related activities – and lead to potential reputational, compliance and financial risks.

The report is compiled from RepRisk’s dynamic ESG risk analytics and metrics and is based on information that is screened, analyzed, and quantified daily from a wide range of publicly- available, third-party sources.

Currently, RepRisk’s ESG Risk Platform covers over 12,000 projects that are linked to ESG-related risk incidents. This number increases daily as new information is captured and analyzed. As our clients have shown increasing interest in our coverage of projects, the MCP Report will now become an annual feature on RepRisk’s calendar of reports.

We hope you find the report useful and interesting. Our aim is to provide transparency and increase awareness of ESG issues – and to encourage corporations to systematically take into account such issues in their risk management strategies and processes. Philipp Aeby CEO, RepRisk AG About RepRisk

RepRisk is a leading business intelligence provider specializing in dynamic environmental, social and governance (ESG) risk analytics and metrics.

On a daily basis, RepRisk systematically screens big data from a broad range of open intelligence sources in 15 languages in order to identify, filter, analyze and quantify ESG risks (such as environmental degradation, human rights abuses and corruption) related to companies, projects, sectors and countries. This external perspective provides valuable insight into whether a company’s policies, processes and commitments are consistently translating into performance.

Since 2006, RepRisk has built and continues to grow the most comprehensive ESG risk database that serves as a due diligence tool and early warning system in risk management, compliance, investment management, corporate benchmarking and supplier risk. The database currently includes risk profiles for over 50,000 private and publicly-listed companies and 12,000 projects as well as for every sector and country in the world.

Headquartered in Zurich, Switzerland, RepRisk serves clients worldwide including global banks, insurance companies, investment managers, and corporates, helping them to manage and mitigate ESG and reputational risks in day-to-day business.

RepRisk provides the transparency needed to enable better, more informed decisions. To learn more, visit www.reprisk.com. Contents Page No. Overview and Ranking 2

#1 Kunshan Zhongrong Metal Plating Factory 3

#2 Buenavista del Cobre Mine (Cananea Mine) 4

#3 Soma Komur Isletmeleri Mine 5

#3 Abbot Point Port Expansion 6

#4 Mauna Ocean Resort 7

#5 2022 FIFA World Cup 8

#6 Mount Polley Mine 9

#7 Qingdao Port 10

#7 Moscow Metro 11

#8 Dan River Steam Station 12

Produced by RepRisk AG Authors: Stella Kenway Editors: Alexandra Mihailescu Cichon, Gina Walser, Viktoria Redey Graphic Design: Bounford.com

All rights reserved with RepRisk AG. No part of this report may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, without the prior permission, issued in writing, of the copyright holders: RepRisk AG, Stampfenbachstrasse 42, 8006 Zurich, Switzerland. Tel. +41 43 300 54 40 www.reprisk.com Overview and Ranking

Throughout 2014, RepRisk system- million people die every year from potential dangers, and accidents then atically screened big data from a work-related accidents and diseases, occurred because the company failed broad range of public sources in 14 and over 300 million non-fatal ac- to take action. Some companies cited in languages in order to identify, fil- cidents take place annually. Such the Report were also accused of trying ter, analyze and quantify environ- accidents not only expose a company to cover up the causes of the accidents. mental, social and governance (ESG) to personal injury and compensa- risks related to companies, projects, tion claims, but also to productiv- Although some other projects in 2014 sectors and countries. ity losses, remedial construction costs, had a higher ranking than those high- retraining costs, and loss of business lighted in this report, we have cho- Our Most Controversial Projects (MCP) opportunities. sen to exclude those that have been Report outlines the ten projects that completed or are now defunct. The had the highest Reputational Risk Index Out of the ten projects ranked in excluded projects are listed below (RRI)1 in 2014 – and therefore, the high- the MCP Report 2014, five are re- the chart.2 est exposure to ESG risks. The projects lated to major workplace disasters are based in North and South America, caused by hazardous working condi- Eurasia, Asia and Australia, and span the tions, which subsequently led to hun- extractive, leisure, industrial transpor- dreds of deaths and injuries as well as tation and utility sectors. widespread environmental pollution. In most of the incidents highlighted in According to the International La- the Report, workers at the sites had bor Organization, an estimated 2.3 warned management in advance of the

Most Controversial Projects of 2014

MCP 2014 Peak RRI Ranking Project Name in 2014 Sector Country

#1 Kunshan Zhongrong Metal Plating Factory 83 Automobile and Parts Korea #2 Buenavista del Cobre Mine 75 Mining Mexico #3 Soma Komur Isletmeleri Mine 65 Mining Turkey #3 Abbot Point Port Expansion 65 Industrial Transportation Australia #4 Mauna Ocean Resort 63 Travel and Leisure Korea #5 2022 FIFA World Cup 62 Travel and Leisure Qatar #6 Mount Polley Mine 61 Mining Canada #7 Qingdao Port 60 Industrial Transportation China #7 Moscow Metro 60 Industrial Transportation Russia #8 Dan River Steam Station 58 Utilities United States of America

1 The RRI is RepRisk’s proprietary risk metric that quantifies a project’s exposure to ESG risks. See methodology on page 13 for more information. 2 Excluded projects: Sewol Ferry, Korea, RRI: 91; 2014 FIFA World Cup, Brazil; RRI: 79; Sochi 2014 Winter Olympics, Russia, RRI: 76; Rana Plaza, Bangladesh, RRI:65; MS Costa Concordia, Italy, RRI: 58.

2 MOST CONTROVERSIAL PROJECTS (MCP) 2014 REPORT #1 Kunshan Zhongrong Metal Factory Sector: Automobiles and parts; Location: China; Peak RRI: 83

The Kunshan Zhongrong Metal Plating RepRisk Index (RRI) Trend of Kunshan Zhongrong Metal Factory Factory in China, owned by Zhongrong Metal Products Co (Zhongrong Metal), is ranked first in our MCP Report 2014 100 due to a massive explosion on August Peak RRI 2, 2014 that killed over 70 workers and 83 in Aug 2014 injured more than 180 others. Zhon- 50 grong Metal Products, a subsidiary of News Stats 11 Total Formosa International Enterprises, is subcontracted by Citic Dicastal Wheel 0 Manufacturing to supply wheels to 2012 2013 2014 2015 General Motors, Volkswagen and Mit- subishi Motors. Environment Social Governance Peak RRI RepRisk® - www.reprisk.com

Investigators claimed that the blast, The Peak RRI for this Special Report refers to the highest RRI in 2014. which tore two large holes in the walls The News Stats refer to the number of risk incidents captured by RepRisk in 2014 for the project. Each risk incident is added only once to the database, unless the risk profile of the incident changes. of the factory, had been caused by a spontaneous combustion of metal dust that had accumulated on the premises. Kunshan Zhongrong Factory was their On December 30, an official report by The authorities accused the company of second-tier supplier and they should the Chinese State Administration of failing to prevent the build-up of alumi- have helped ensure safe working condi- Work Safety, confirmed that the fi- num dust at the factory and detained tions. The NGO described the factory as nal death toll from the accident had five Zhongrong executives for ques- being in a “dilapidated state”, and reached 146. tioning. Apparently, between 2009 and claimed it did not meet the necessary 2012 there had been several other fac- safety standards. At the time of writing, 15 officials of the tory fires in China that had been similar- Kunshan city government were facing ly caused by the spontaneous combus- Factory staff also complained about prosecution in relation to the accident, tion of metal particles. long working hours, with one worker together with three of the Zhongrong claiming that employees had to work a Metal executives arrested in August. Allegedly, there had been another dust- minimum of 12 hours a day. related fire at the Kunshan Zhongrong factory two months before the August At the end of August, the Chairman, 2014 explosion, and the company had General Manager, and Production Man- repeatedly ignored warnings from local ager of Zhongrong Metal were arrested work safety authorities about the risks for their roles in the accident. associated with metal dust. Zhongrong Metal had also been criticized for environmental and safety issues related Top ESG issues linked to Kunshan Zhongrong Metal Factory to its waste gas and water discharges. Apparently, Zhongrong Metals had not 1. Occupational Health and Safety Issues purchased work accident insurance and high-risk industry insurance for 2. Violation of National Legislation its employees. 3. Poor Employment Conditions The NGO China Labor Watch claimed that General Motors and its subsid- 4. Waste Issues iary General Motors China were partly 5. Impacts on Communities responsible for the accident as the

MOST CONTROVERSIAL PROJECTS (MCP) 2014 REPORT 3 #2 Buenavista del Cobre Mine Sector: Mining; Location: Mexico; Peak RRI: 75

The Buenavista del Cobre Mine in the RepRisk Index (RRI) Trend of Buenavista del Cobre Mine Mexican state of Sonora, also known as the Cananea Mine, ranks second on our MCP 2014 Report due to a spill of 40,000 100 cubic meters of sulfuric acid into the Riv- Peak RRI ers Sonara and Bacanuchi on August 6, 75 in Sep 2014 2014. The mine is owned by Grupo Mex- 50 ico through Southern Copper Corpora- News Stats tion and is operated by Buenavista del 17 Total Cobre SA. 0

The spill reportedly deprived 20,000 2012 2013 2014 2015 people of water, destroyed crops and Environment Social Governance Peak RRI cattle, and contaminated wells and soil. RepRisk® - www.reprisk.com Greenpeace Mexico estimated that it The Peak RRI for this Special Report refers to the highest RRI in 2014. would take up to 20 years to decontami- The News Stats refer to the number of risk incidents captured by RepRisk in 2014 for the project. Each risk incident is added only once to the database, unless the risk profile of the incident changes. nate the area.

The company’s claim that the accident had been caused by an “unusual amount workers who had been contaminated In December, local residents staged a of rain,” was rejected by Mexico’s Min- by the company’s operations. protest in response to Grupo Mexico’s istry of the Environment, who described decision to stop the provisional wa- the incident as the “worst environmen- At the beginning of November, the may- ter supply arranged following the leak. tal disaster in the country’s mining his- ors of the municipalities affected by the They further claimed that had not re- tory.” Mexico’s environmental protec- spill accused Grupo Mexico of black- ceived any money from the USD 148 tion agency, Profepa, then filed charges mailing them into signing a statement million compensation fund set up by the against Buenavista del Cobre SA for vio- falsely confirming that a team of 1,200 company, and there were rumors that lating environmental laws and for pos- workers from companies including Grupo Mexico had falsified the data and sible negligence in the handling of haz- M3, COESIN, Ocitrimix, Tierra Caliente, that the August spill was greater than ardous substances. Gluyas, ICCSA and McDesert had almost the official figure. At the end of Decem- completed the clean-up of the 250-ki- ber, a representative of the National In September, Grupo Mexico finally ad- lometer stretch of river that had been Miners’ Union warned that the mine’s mitted that a defective pipe seal had contaminated. The mayors claimed, tailings dam could completely collapse caused the accident. however, that the company had done at any moment and destroy the villages little to remedy the situation. that house 25,000 people. However, later that month, another toxic spill from the Cananea Mine into the Bacanuchi River prompted the So- nora State Civil Protection Agency to an- Top ESG issues linked to Buenavista del Cobre Mine nounce it was severing its relationship with Buenavista del Cobre SA. 1. Impacts on Ecosystems and Landscapes

The National Miners’ Union then ac- 2. Local Pollution cused Grupo Mexico of violating human rights by dismissing 1,200 miners 3. Impacts on Communities who had been on strike at the mine. The company was also accused of 4. Violation of National Legislation denying health services to retired 5. Human Rights Abuses and Corporate Complicity miners, and medical attention to

4 MOST CONTROVERSIAL PROJECTS (MCP) 2014 REPORT #3 Soma Komur Isletmeleri Mine Sector: Mining; Location: Turkey; Peak RRI: 65

The Soma Komur Isletmeleri Mine RepRisk Index (RRI) Trend of Soma Komur Isletmeleri Mine (Soma Mine) in Turkey is ranked third on the MCP 2014 Report due to an explosion on May 13, 2014 that caused 100 301 deaths. The mine is operated by Peak RRI Soma Komur Isletmeleri AS (Soma Min- 65 in Jul 2014 ing) and owned by Soma Holding. At 50 first it was thought that a transformer News Stats had exploded and had subsequently 14 Total caused a fire, however, other reports 0 alleged a spontaneous combustion of 2012 2013 2014 2015 coal had caused the accident. In the immediate aftermath of the accident, Environment Social Governance Peak RRI up to 274 miners were confirmed dead RepRisk® - www.reprisk.com and a further 120 were trapped under- The Peak RRI for this Special Report refers to the highest RRI in 2014. ground. The final death toll was put at The News Stats refer to the number of risk incidents captured by RepRisk in 2014 for the project. Each risk incident is added only once to the database, unless the risk profile of the incident changes. 301 and the autopsies showed that carbon monoxide poisoning had caused 85 percent of the deaths. atures and fluctuating carbon monox- government agencies had led to a trag- Following the accident, workers ac- ide readings during the three months edy that could have been prevented. cused the mine owners of “operating in leading to the accident. The report also a culture of bullying and cost cutting.” found that safety records had been In November, Turkish prosecutors Soma Mining was also denounced for repeatedly falsified, gas and carbon sought first-degree murder charges using faulty equipment and of hiding monoxide sensors had been broken and 301 consecutive life sentences for serious safety issues during inspec- or improperly calibrated, and there the CEO and seven senior officials of tions. Police subsequently detained 25 had been no evacuation plans or com- Soma Holding. Up to 20 years in prison individuals, including the CEO and the pulsory health and safety training for were sought for another eight Soma Operations Manager of the company, workers. The company was also criti- Mining employees accused of negligent accusing them of negligence leading to cized for reportedly failing to provide homicide. multiple deaths and injuries. proper gas masks or a refuge chamber in the mine. In July, Soma Mining was accused of falsifying records of gas measurements The IndustriALL Union claimed that at the mine. Allegedly, hard copies of severe negligence by Soma Mining, the operator’s gas measurement logs Turkish Coal Enterprises and Turkish indicated that there should have been no cause for alarm on the day of the accident. However, digital readings re- Top ESG issues linked to Soma Komur Isletmeleri Mine corded in the mine during the same pe- riod reportedly showed high levels of 1. Occupational Health and Safety Issues carbon monoxide. 2. Violation of National Legislation In October, a report commissioned by Turkish Public Prosecutors blamed the 3. Fraud disaster on “negligent practices and complete disregard for worker safety.” 4. Corruption, Bribery, Extortion and Money Laundering Apparently, miners had continued to 5. Forced Labor work despite excessively high temper-

MOST CONTROVERSIAL PROJECTS (MCP) 2014 REPORT 5 #3 Abbot Point Port Expansion Sector: Industrial Transportation;Location: Australia; Peak RRI: 63

A surging energy demand from Asia is RepRisk Index (RRI) Trend of Abbot Point Port Expansion driving the construction of liquefied natural gas terminals and coal terminals on Australia’s northeast coast. The ex- 100 pansion of one such terminal, the North Peak RRI Queensland Bulk Ports terminal at Ab- 63 in May 2014 bot Point, drew severe criticism in 2014 50 and has resulted in the Abbot Point News Stats Port Expansion being ranked in joint 16 Total third place in the MCP 2014 Report. A 0 consortium comprised of Adani Group, 2012 2013 2014 2015 North Queensland Bulk Ports and GVK Hancock is overseeing the construction Environment Social Governance Peak RRI of the project. Reportedly, the proj- RepRisk® - www.reprisk.com ect would produce about three million The Peak RRI for this Special Report refers to the highest RRI in 2014. cubic meters of dredged debris, which The News Stats refer to the number of risk incidents captured by RepRisk in 2014 for the project. Each risk would be dumped on the seabed near incident is added only once to the database, unless the risk profile of the incident changes. the Great Barrier Reef. The Reef is des- ignated as a World Heritage Site and is home to over 600 types of coral and In September, the construction con- In November, there were allegations 1,625 species of fish, as well as other sortium suggested dumping the dredg- that dredging activities were already se- marine animals. ing waste onshore instead of on the verely damaging the Reef and UNESCO Great Barrier Reef. However, Australia’s warned that it might include the Great Greenpeace and other environmental Green Party warned that this alterna- Barrier Reef on its list of World Heritage groups warned that the project will neg- tive would still contribute to climate Sites in Danger. atively impact marine life as well as Aus- change, as the project would increase tralia’s fishing and tourism industry, and coal transportation. Following criticism from several NGOs, Australia’s Greens Party called on the including ATTAC France, Société Gé- Australian government to revoke the li- In October, the Rainforest Action Net- nérale also announced in December cense. Meanwhile, UN experts, the Aus- work (RAN) called on international that it was withdrawing from the Alpha tralian Institute of Marine Science, and banks to stop financing the Abbot Point Coal project, which includes the Abbot the Australian Conservation Foundation Coal Terminal. Following protests from Point Port Expansion. warned that even apart from the waste Friends of the Earth and Fight for the issues, the dredging activities alone Reef, Deutsche Bank and HSBC decided would endanger coral and seagrass. to withdraw their investments in the Furthermore, the North Queensland Abbott Point Port Expansion. Conservation Council began a court bat- tle to stop the Abbot Point expansion. Top ESG issues linked to Abbot Point Port Expansion BlackRock also flagged the environmental risks and warned that operating near 1. Impacts on Ecosystems and Landscapes the Reef might pose high reputational risks and potential loss of a social license 2. Waste Issues to operate. The Great Barrier Reef Ma- rine Park Authority estimated that the 3. Local Pollution number of ships crossing the reef would increase by 250 percent in the next 20 4. Global Pollution (Including Climate Change) years, and warned that this would se- 5. Impacts on Communities verely harm marine life.

6 MOST CONTROVERSIAL PROJECTS (MCP) 2014 REPORT #4 Mauna Ocean Resort Sector: Travel and Leisure; Location: Korea; Peak RRI: 63

The Mauna Ocean Resort in Gyeongiu, RepRisk Index (RRI) Trend of Mauna Ocean Resort South Korea, is fifth in our MCP 2015 Re- port due to an accident at the resort’s gymnasium on February 17, 2014, that 100 killed at least ten people and injured Peak RRI more than 100. The resort includes ho- 63 in Mar 2014 tel facilities and a golf course, and is op- 50 erated by Mauna Ocean Development. News Stats 10 Total

Allegedly, the roof of the gymnasium 0 caved in while more than 560 first-year 2012 2013 2014 2015 college students were attending a fresh- men orientation event. Fire services Environment Social Governance Peak RRI blamed the collapse on the weight of RepRisk® - www.reprisk.com snow on the roof of the building, lead- The Peak RRI for this Special Report refers to the highest RRI in 2014. ing police to question why the roof had The News Stats refer to the number of risk incidents captured by RepRisk in 2014 for the project. Each risk not been cleared following a severe incident is added only once to the database, unless the risk profile of the incident changes. snowfall on the day of the accident. Although many students were able to escape, some became trapped under been properly equipped for the heavy In September, the Daegu District Court the debris. The weather conditions also lighting system that had been installed. handed out various prison sentences to hampered the rescue work. Following investigations, it was alleged 13 executives and employees of Mauna that the construction blueprints had not Ocean Resort, as well as executives of South Korea’s National Forensic Service been followed, that the ceiling and pil- the construction companies that built launched an investigation to determine lars had not been properly connected, the complex. the cause of the accident and allegedly and that the recommended construc- discovered that the gymnasium had tion materials had not been used. been built in only 75 days by Songwon Construction, a sub-contractor of Ko- South Korean police then conducted lon Construction, which is part of the search and seizure operations against Kolon Global Corporation. There were Mauna Ocean Resort, as well as its op- also claims that the gymnasium had not erator, constructor, and building sup- had an independent safety inspection pliers for possible safety violations in since 2009. connection to the collapse. The police announced they would take legal ac- The authorities then claimed that the tion against 20 parties who were held building had been used for unauthor- responsible for the accident and issued ized purposes: although the building arrest warrants for executives of Mauna had only been given a permit for use as Ocean Resort on grounds of negligent a sports facility, investigations revealed manslaughter. that the gymnasium had in fact been used as a multi-use facility for events such as orientations and concerts. Top ESG issues linked to Mauna Ocean Resort

Experts were of the opinion that the 1. Impacts on Communities modern, pre-fabricated building had been made of flimsy materials and had 2. Products (Health and Environmental Issues) been poorly constructed. There were also claims that the building had not 3. Violation of National Legislation

MOST CONTROVERSIAL PROJECTS (MCP) 2014 REPORT 7 #5 2022 FIFA World Cup Sector: Travel and Leisure; Location: Qatar; Peak RRI: 62

During 2014, the 2022 World Cup to RepRisk Index (RRI) Trend of 2022 FIFA World Cup be hosted by Qatar faced widespread criticism for the allegedly “inhumane” working conditions of around 1.4 million migrant workers who were build- 100 ing the facilities for the event. There Peak RRI were repeated reports of workplace 62 in Mar 2014 accidents caused by dangerous work- 50 ing conditions and lack of safety equip- News Stats 34 Total ment, as well as allegations that workers had died from heart failure after 0 being forced to work in temperatures 2012 2013 2014 2015 that reached 50 degrees centigrade. Environment Social Governance Peak RRI RepRisk® - www.reprisk.com In May, claims by The Guardian news- The Peak RRI for this Special Report refers to the highest RRI in 2014. paper that workers were dying at the The News Stats refer to the number of risk incidents captured by RepRisk in 2014 for the project. Each risk rate of one per day, triggered an official incident is added only once to the database, unless the risk profile of the incident changes. investigation by the Qatari authorities. The investigation showed that 430 Nep- alese workers and 567 Indian workers claimed that Qatar Petroleum, Hyundai paid almost USD 2 million by Kemco, a had died between January 2012 and Engineering & Construction and OHL company owned by the former executive April 2014 on construction sites for the were subcontracting work for the 2022 committee member for Qatar, shortly 2022 event. The International Trade World Cup construction projects to after the Gulf state was awarded the Union Confederation estimated that up companies that allegedly exploited mi- tournament. There were also claims that to 4,000 laborers working on the infra- grant laborers. the Qatari former president of the Asian structure for the tournament could die Football Confederation had channeled up before the 2022 completion date. Allegations of corruption concern- to USD 5 million to FIFA officials to help ing the 2022 World Cup also continued Qatar win the bid. The US Treasury De- In July, the Qatar Foundation highlight- throughout 2014. In March, UK Mem- partment also linked the event to terror- ed the role of corrupt recruitment agen- bers of Parliament called on the Fédéra- ism by claiming that the former President cies in the workers’ country of origin, tion Internationale de Football Asso- of the Qatar Football Association had fa- who allegedly charged exorbitant fees, ciation (FIFA) to strip Qatar of the event cilitated transfers worth USD hundreds of demanded kickbacks and used unfair after an investigation by the Daily Tele- thousands to Al Qaeda and its affiliates. practices that exposed workers to debt graph newspaper revealed that Jack bondage and forced labor. The Foun- Warner, the former vice-president of dation warned that some of the labor FIFA, and his family members had been practices violated the ILO Conventions and Qatari national law. There were also claims that 90 percent of the salaries of Top ESG issues linked to 2022 FIFA World Cup the North Korean workers working on Qatar’s World Cup facilities was expro- 1. Human Rights Abuses and Corporate Complicity priated by North Korean authorities. 2. Poor Employment Conditions During 2014, construction and engineering companies including Carillion, 3. Occupational Health and Safety Issues Hochtief, Bilfinger, Siemens, Bouygues and Vinci were accused of benefit- 4. Forced Labor ing from the exploitation of workers, 5. Corruption, Bribery, Extortion and Money Laundering and in October, Amnesty International

8 MOST CONTROVERSIAL PROJECTS (MCP) 2014 REPORT #6 Mount Polley Mine Sector: Mining; Location: Canada; Peak RRI: 61

The Mount Polley copper and gold mine, RepRisk Index (RRI) Trend of Mount Polley Mine owned by Imperial Metals Corporation (Imperial Metals) in the Cariboo District of British Columbia in Canada, entered the news in the summer of 2014 when 100 Peak RRI the dam of it tailings pond ruptured. 61 in Sep 2014 The accident, which occurred on Au- gust 4, 2014, caused around 17 million 50 News Stats cubic liters of water and 8 million cu- 11 Total bic meters of mining waste to leak into the lakes of Polley and Quesnel. NGOs 0 claimed that the amount of water re- 2012 2013 2014 2015 leased was equivalent to about 2,000 Environment Social Governance Peak RRI Olympic-sized swimming pools and the RepRisk® - www.reprisk.com accident was described as the worst The Peak RRI for this Special Report refers to the highest RRI in 2014. environmental catastrophe in Canadian The News Stats refer to the number of risk incidents captured by RepRisk in 2014 for the project. Each risk mining history. incident is added only once to the database, unless the risk profile of the incident changes.

The authorities immediately banned the use of water from the lakes due to fears preliminary environmental impact as- cess to Imperial Metals’ Red Chris Mine, that the tailings material could include sessment for the accident, as well as an due to fears of a similar tailings dam harmful chemicals such as arsenic, mer- action plan to stop the release of tail- rupture. The Neskonlith Indian Band cury, and sulfur. The ban at first included ings by August 13, 2014. Allegedly, the then issued an eviction notice against water from Quesnel Lake, Polley Lake, Ministry of Environment had repeat- Imperial Metals on the grounds that the Hazeltine Creek and Cariboo Creek, but edly warned Imperial Metals about company had failed to protect the land was then widened to include the entire the Mount Polley Mine and a previous and waters of their territory. Quesnel and Cariboo river systems right foreman of the company had also raised up to the salmon-bearing Fraser River. concerns about the dam. The Ministry of Environment is currently overseeing the clean-up efforts Concerns were raised about the long- For some time, the Tahltan First Nation in Cariboo, but there are fears that the term damage to livestock and wild elders, known as the Klabona Keepers remedial work could take years. animals, and the director of the Water- Elders Society, had been opposing min- shed Watch Salmon Society said that ing activities by Imperial Metals in the the chemicals contained in the tailings area known as the Sacred Headwaters, waste could have both short-term and which is near the site where the rupture long-term impacts on aquatic life. He occurred. On August 8, they blocked ac- further highlighted the spill’s potential impact on about 1.5 million sockeye salmon that were expected to return to Top ESG issues linked to Mount Polley Mine the Quesnel Lake system. 1. Impacts on Ecosystems and Landscapes British Columbia Ministry of Energy and Mines then issued a pollution abate- 2. Local Pollution ment order to the Imperial Metals subsidiary, Mount Polley Mining, and 3. Waste Issues warned that the company would have to pay for any mistakes. The Ministry 4. Impacts on Communities of Environment in British Columbia also 5. Violation of National Legislation ordered Imperial Metals to submit a

MOST CONTROVERSIAL PROJECTS (MCP) 2014 REPORT 9 #7 Qingdao Port Sector: Industrial Transportation;Location: China; Peak RRI: 60

At the end of May 2014, Qingdao Port RepRisk Index (RRI) Trend of Qingdao Port in Shandong, China, found itself at the center of an alleged metal financing fraud. The Chinese authorities launched an investigation following suspicions 100 that a private metals trading firm, Dech- Peak RRI 60 in Aug 2014 eng Mining, a subsidiary of Dezheng Re- sources Holdings, had used fake receipts 50 to repeatedly mortgage commodities News Stats 9 Total stored at the port, which is operated by Qingdao Port International. 0 2012 2013 2014 2015 There were allegations that Decheng Environment Social Governance Peak RRI Mining and Dezheng Resources had il- RepRisk® - www.reprisk.com legally pledged the same stockpiles of The Peak RRI for this Special Report refers to the highest RRI in 2014. commodities to secure multiple loans The News Stats refer to the number of risk incidents captured by RepRisk in 2014 for the project. Each risk amounting to CNY 6.67 billion (USD 1.1 incident is added only once to the database, unless the risk profile of the incident changes. billion) from 17 banks. It was alleged that the banks held warehouse receipts for around 300,000 tons of aluminum province. Dezheng Resources was co- Commodity Trading, for CNY 1 million ingots, although the port was storing founded by Jiaxin Properties and Shang- (USD 162,000). South Africa’s Standard only 100,000 tons. hai Maide Economic Development. Bank’s estimated that its exposure to the fraudulent financing arrangements Citic Resources Holdings reported that The Qingdao Port scandal resulted was around USD 167 million. over 123,000 metric tons of aluminum, in multiple lawsuits involving cross- worth approximately USD 50 million, country jurisdictions. A Citic subsidiary In June 2014, a subsidiary of Shanxi had gone missing from the port. Citic’s sued Qingdao Port International and its Coal International Energy sued several commodities were allegedly stored parent, Qingdao Port Group, for USD Dezheng affiliates, including Decheng at the port under a sales partnership 108 million in connection to the fraud. Mining and Yida Mining, at the Shanxi with Dezheng’s affiliate, Hongtu Logis- Standard Chartered and HSBC also filed Superior People’s Court for CNY 1.1 bil- tics, managed by Qingdao Hengtong claims against the chairman of Dezheng lion (USD 178.3 million), in payment for Import and Export. Foreign companies Resources and his overseas financing commodities that had been stored at including HSBC, Citigroup, Mercuria En- vehicle, Zhong Jun Resources, in rela- Qingdao Port. ergy Trading, and Citic Resources Hold- tion to the scandal. ings, estimated that their exposure to the fraud would amount to over USD ABN AMRO and Glencore’s Pacorini Lo- 880 million. gistics also took legal action concerning the case, and CWT Commodities report- Qingdao Port and the warehouse opera- ed that it had also been affected. ABN tors including GKE, CWT, Pacorini Met- AMRO also took legal action against Cit- als, and North European Marine Servic- ic Resources’ subsidiary, Citic Australia es, were criticized for failing to detect irregularities in the warehouse receipts. Top ESG issues linked to Qingdao Port The scandal had allegedly come to light following the arrest of the owner of Dezheng Resources in late April 2014, in 1. Fraud relation to a corruption probe involving 2. Violation of National Legislation a government official in Xining, Qinghai

10 MOST CONTROVERSIAL PROJECTS (MCP) 2014 REPORT #7 Moscow Metro Sector: Industrial Transportation;Location: Russia; Peak RRI: 60

On July 15, 2014, 23 people died and RepRisk Index (RRI) Trend of Moscow Metro more than 160 people were seriously injured as a result of a train derailment in the Moscow Metro. The accident, which 100 was said to be “one of the worst” metro Peak RRI crashes ever, occurred in the morning 60 in Sep 2014 rush hour between Slaviansky Boule- 50 vard and Victory Park stations, report- News Stats edly due to a power surge. 7 Total 0 Concerns were raised about the qual- 2012 2013 2014 2015 ity of construction work by Engeocom and its subcontractor, Spetstekhrekon- Environment Social Governance Peak RRI struktsiya. The companies had been RepRisk® - www.reprisk.com contracted to install railroad switches The Peak RRI for this Special Report refers to the highest RRI in 2014. on the metro line between Slaviansky The News Stats refer to the number of risk incidents captured by RepRisk in 2014 for the project. Each risk Boulevard and Victory Park stations, incident is added only once to the database, unless the risk profile of the incident changes. and had finished their work one day before the derailment. There were allegations that the companies’ workers had At the end of July, Russia’s Investigative offices shortly after the accident in July failed to properly fix the switch mecha- Committee launched a criminal case 2014, and then again in December 2014. nisms, and had used simple metal wires against four employees of Moscow to bind them. Metro and Spetstekhrekonstruktsiya, The investigations are still ongoing. on charges of violating safety regu- There was also speculation that defec- lations. The officials said that the tive parts supplied by Metrowagonmash accident was due to a lack of discipline, had caused the crash. The chairman of rather than technical issues. In Septem- the Zaschita Trade Union claimed that ber, experts from the Russian Minis- faulty parts had been installed due to try of Defense were commissioned to a failure to control incoming supplies at assist investigators in determining the the company’s factory. He also claimed causes of the accident. that the compressed air system in the brakes of the metro train had been of Ingeokom, which was apparently re- poor quality. sponsible for the rail works in the Arbats-Pokrovs section where the The Moscow authorities were also criti- accident happened, was also inves- cized for not spending enough money tigated. Russian law enforcement on the maintenance of the metro. authorities searched the company’s

Several people had reportedly raised concerns about the safety of the met- Top ESG issues linked to Moscow Metro ro trains prior to the accident. In April 2014, Metrovagonmash had allegedly 1. Products (Health and Environmental Issues) fired 16 members of the Zaschita Trade Union and justified the dismissals by 2. Violation of National Legislation staff cuts. The workers insisted however that they had been fired partly because 3. Impacts on Communities they had refused to attach defective 4. Freedom of Association and Collective Bargaining parts to subway cars.

MOST CONTROVERSIAL PROJECTS (MCP) 2014 REPORT 11 #8 Dan River Steam Station Sector: Utilities; Location: United States of America; Peak RRI: 58

On February 2, 2014, a storm water pipe RepRisk Index (RRI) Trend of Dan River Steam Station ruptured at Duke Energy’s Dan River Steam Station in Eden in the US state of North Carolina, causing between 50,000 10 0 to 82,000 tons of coal ash waste to leak Peak RRI 58 in Jun 2014 into the Dan River. The spill, said to be the third largest in US history, coated 5 0 the riverbed with toxic sludge for an es- News Stats 31 Total timated 70 miles downstream. The US Forest Service warned that the spill had 0 probably caused at least USD 70 million 2 0 12 2 0 13 2 0 14 2 0 15 in damages to the economy. Environment Social Governance Peak RRI RepRisk® - www.reprisk.com Water samples taken downstream from the spill and analyzed by the NGOs Wa- The Peak RRI for this Special Report refers to the highest RRI in 2014. terkeeper Alliance and Yadkin River- The News Stats refer to the number of risk incidents captured by RepRisk in 2014 for the project. Each risk keeper allegedly showed significantly incident is added only once to the database, unless the risk profile of the incident changes. higher levels of arsenic, chromium and lead than samples taken upstream. The levels of arsenic reportedly breached Carolina Department of Environment Landfill. An investigation into the com- the Environmental Protection Agency’s and Natural Resources had known since pany’s coal ash waste revealed that the (EPA) standards for the protection of 2011 that the groundwater near the Dan company had 108 million tons of coal wildlife and fish, and were 35 times River Plant contained toxic substances ash, stored in 32 open ponds across higher than the EPA’s maximum con- that were above state standards. North Carolina. taminant standards for drinking water. Later in the summer, the Dan River In August 2014, Duke Energy was A few days after the spill, Waterkeeper Steam Station was cited as an example ordered to cap or remove the Alliance claimed that a discharge pipe in a report compiled by Earth Justice ash dumps by 2029 and close four from the steam station was still leaking and Physicians for Social Responsibility, plants, including the Dan River Steam coal ash, and alleged that Duke Energy entitled “Ash in Lungs: How Breathing Station, by August 2019. could have avoided the spill if it had Coal Ash is Hazardous to Your Health.” removed the toxic ash heaps when ad- vised to do so years earlier by the EPA. Duke Energy was then denounced for burying 3,000 tons of recovered coal In May, organizations including the Na- ash from the spill at Republic Services’ tional Association for the Advancement private Upper Piedmont Environmental of Colored People and Waterkeeper Alliance criticized Duke Energy for the spill, and protestors at the company’s Top ESG issues linked to Dan River Steam Station annual general meeting opposed a USD 1.1 million bonus awarded to Duke En- 1. Impacts on Ecosystems and Landscapes ergy’s CEO. 2. Local Pollution In June, residents of Dukeville began complaining of cancers, birth defects 3. Waste Issues and heavy-metal contamination in their blood, which are associated with con- 4. Violation of National Legislation taminated drinking water. They com- 5. Impacts on Communities plained that Duke Energy and the North

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MOST CONTROVERSIAL PROJECTS (MCP) 2014 REPORT 13 ESG Business Intelligence

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