Industry News Roundup August 2012

August 31, 2012

Finance & Banking

Banks accused of Libor rigging and unlawful transactions

In what is termed the ‘Libor scandal’, seven banks including HSBC and Royal Bank of Scotland, are to be questioned in the US for alleged manipulation of the lending rate. Libor is used as a reference to price trillions of dollars of financial products. In July, Barclays was fined £290 million by UK and US regulators for rigging Libor. The investigation is predicated on the assumption that at least one other bank must have colluded with Barclays in any attempts to manipulate Libor rates.

The scandal has forced Barclays chief executive Bob Diamond to resign and a government-ordered review into Libor is currently being conducted by the managing director of the Financial Services Authority, Martin Wheatley. The Wheatley review is examining how the Libor rate is calculated and regulated. A review released by the UK’s Treasury department said that not only was Libor “not fit for purpose” but that all benchmark rates used by financial markets should be subject to more rigorous scrutiny.

Separately, Barclays says the UK's Serious Fraud Office has started an investigation into payments between the bank and Qatar Holding LLC. (BBC News; Financial Times*)

Standard Chartered settles Iran money case

This is whilst US Department of Financial Services (DFS) has accused Standard Chartered of hiding $250 billion of transactions with the Iranian government, leaving “the US financial system vulnerable to terrorists, weapons dealers, drug kingpins and corrupt regimes”  and generating “hundreds of millions of dollars” in fees for the bank, the DFS order stated. Standard Chartered agreed to pay $340 million to a New York regulator to settle allegations that it broke US money-laundering laws. The sum is the largest fine ever collected by a single US regulator in a money-laundering case. HSBC is also being probed by US authorities and has told investors that it has reserved $700 million to pay fines. (Financial Times*; Wall Street Journal)

Equator Principles group unveil new green investment guidelines

Financial institutions around the world were this month invited to consider a proposed update to the ‘Equator Principles’. The Equator Principles are a widely adopted set of due diligence guidelines designed to help banks and institutional investors identify, assess and manage environmental and social risks associated with project finance deals. They were originally launched in June 2003 and have been subsequently endorsed by 77 financial institutions in 32 countries, including global giants such as Bank of America, Barclays and JP Morgan Chase. The draft changes extend the principles to cover project-related corporate loans and bridge loans, introducing new requirements for managing climate impacts, delivering more stringent reporting and transparency requirements, and placing a greater emphasis on human rights considerations. (Business Green)

 

Natural Resources

Deep-water Arctic drilling plans pulled

Russian state-owned energy giant Gazprom has pulled the plug on a deep-water drilling project in the Arctic due to soaring costs, falling European demand and cheap shale gas in America. Gazprom was due to be the first company to begin commercial oil production in the offshore Arctic, with drilling to begin next year. In early August it was uncovered by a group of non-governmental organisations (NGOs) that Gazprom would be acting illegally if it were to begin the drilling. The Russian government confirmed that Gazprom does not hold a valid emergency oil response plan, a legally-binding document that must be approved by the government before it can start drilling. However, the company said it had not started Arctic drilling and was still undertaking preparatory work. In protest six Greenpeace activists, including its executive director, boarded a Gazprom oil rig.

More recently, Royal Dutch Shell has been given preliminary permission to begin drilling in the Alaskan Arctic. The company hopes to complete two exploration wells in the region before the threat of encroaching sea ice makes operations impossible.  Green groups are concerned an oil spill could have a devastating impact on marine life. (BBC; The Times*; Financial Times*)

Progress in eliminating conflict from minerals supply chains

Humanity organisation the Enough Project has released its second report ranking company progress toward responsible and conflict-free supply chains.  “Conflict minerals” are certain minerals commonly mined in strife-torn areas of Central Africa thought to fund armed groups that commit human rights abuses. Whilst improvements can be made, the report shows that the majority of companies surveyed have made great strides in eliminating conflict minerals from their supply chains since first being evaluated in 2010. Some significant successes include:  Intel was the first company to publicly commit to producing a fully conflict-free product- a microprocessing chip that will be produced by 2013; and HP and Motorola Solutions have actively engaged to help Congo develop a clean minerals trade.

This is whilst United States non-profit Business & Human Rights Resource Centre released its full compilation of responses from electronics companies to concerns raised by Global Witness. The concerns surrounded the discrepancy between companies proclaiming their support of US conflict minerals legislation while their business associations were lobbying against the legislation. NGOs praised General Electric, Microsoft and Motorola Solutions for "breaking" with the US Chamber of Commerce on conflict minerals, and called on other companies to follow suit. (CSR Wire; Forbes)

 

Textiles & Apparel

Clothing companies launch sustainability index

The most comprehensive and up-to-date tool for measuring sustainability and environmental impact of apparel and footwear across the industry value chain has officially been launched by the Sustainable Apparel Coalition (SAC). The ‘Higg Index’ has been developed by a group of experts from academia, brands, manufacturers and governmental and non-governmental organisations. It was unveiled by the SAC, a trade body which claims to represent more than a third of the global apparel and footwear industries. Companies including Nike, Marks & Spencer, Levi's and Walmart are backing the Index. Through providing a thorough collection of data on environmental performance over the entire life of a product – from sourcing to recycling or product disposal – the tool offers an opportunity for companies to use the information and analysis to design their sustainable strategies in the most effective way. Coalition executive director Jason Kibbey revealed the long term goal for the initiative is to develop a consumer-facing rating for clothing products. (Forbes; Business Green; Made By)

 

Consumer Goods

Johnson & Johnson widespread commitment to toxic ingredient removal

Johnson & Johnson, which makes a range of personal care products, has announced plans to remove a host of potentially harmful chemicals like formaldehyde from its line of products by the end of 2015. In doing so it is becoming the first major consumer products company to make such a widespread commitment. The company had already pledged to remove certain chemicals from its baby products by 2013, but the latest announcement extended the programme to its adult products, including well-known drugstore brands like Neutrogena, Aveeno and Clean & Clear. Lisa Archer, director of the Campaign for Safe Cosmetics, said her group would continue to press other cosmetics and consumer-goods companies to follow Johnson & Johnson. (New York Times)

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