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Trillium News

August 5, 2013

DC District Court Upholds “Conflict Minerals Disclosure” Section of the Dodd Frank Act

Susan Baker, Vice President, Shareholder Advocacy and Corporate Engagement: July 2013

On July 23rd, the U.S. District Court for the District of Columbia ruled to uphold the implementing rules for Section 1502 of the Dodd-Frank Act, which relates to Conflict Minerals Disclosure. The Court also dismissed a lawsuit filed against the U.S. Securities and Exchange Commission (SEC) by the U.S. Chamber of Commerce, the National Association of Manufacturers, and the Business Roundtable; “[f]inding no problems with the SEC’s rulemaking and disagreeing that the ‘conflict minerals’ disclosure scheme transgresses the First Amendment, the Court concludes that Plaintiffs’ claims lack merit.”

Section 1502 provides details on how corporations will be required to report to the SEC on their use of “conflict minerals” from the Eastern Democratic Republic of the Congo (DRC) and surrounding regions, where a violent conflict has been raging for 15 years, claiming over five million lives. The four conflict minerals—tin, tantalum, tungsten, and gold—are critical to the reliable functioning consumers have come to expect from cell phones, laptops, jewelry, automobiles, and many other manufactured products.

The implemented rules will allow investors to evaluate the extent to which portfolio companies are exposed either directly or indirectly, to significant human rights risks associated with conflict minerals, thereby improve investors’ ability to make sound financial investments,. Going forward, affected companies will need to provide public disclosures, annually.

As investors, we believe that Section 1502 of the Dodd-Frank Act provides a critical leverage point to address one of the root causes of the ongoing violence that has plagued the Democratic Republic of Congo. The rules intent is to expose the illicit trade of minerals – a key financial resource for rebel groups – and move sourcing to responsible supplies in the DRC. We are in regular dialogue with

Intel, Hewlett-Packard, Motorola Solutions*, and Advanced Micro Devices*, who support the rule, but due to the ‘phase-in’ period investors will have to press companies over the next few years for continuous and rapid improvement in addressing these human rights risks.

Over the last three years, members of an investor coalition led by Responsible Sourcing Network, Boston Common Asset Management, Calvert Investments, and Trillium Asset Management, submitted several recommendations to the SEC during the rule?making process. The coalition also included members of the Interfaith Center on Corporate Responsibility (ICCR), a membership association of 275 faith-based institutional investors including religious communities and asset management companies; United Nations’ PRI: Principles for Responsible Investment; and US SIF: The Forum for Sustainable and Responsible Investment, a membership association of investors, firms, institutions, and organizations engaged in sustainable and responsible investing. Key components from the investors’ letters were included in the final rule.

We commend the leadership of the Enough Project and Global Witness — along with a number of major U.S. companies — that worked collaboratively with investors through the lengthy rulemaking process.

The rule charts a workable path forward for companies to report on the sourcing and due diligence processes associated with the minerals captured by the legislation. As investors, we commend companies that have already begun implementation of the 1502 rule and encourage all companies to comply with its provisions swiftly and fully.

We also encourage responsible investment in the DRC and the broader Great Lakes Region—consistent with the provisions of this law and the rule implementing it—in order to help support peace and prosperity after two decades of bloody conflict and massive dislocations affecting millions of people.

*In addition to engaging with our core portfolio companies, Trillium also conducts advocacy on selected companies (identified with an “*”) that are not in our core portfolios but are held as legacy positions in client portfolios. These are companies that may not meet our minimum social and environmental criteria, but that we still seek to improve.

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