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Dodd Frank Minerals Case Won!
By Robyn Taylor Knapp

A federal district court has upheld the Securities and Exchange Commission’s “conflict minerals rule” and the statue that required adoption of this rule. The rule, mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act, requires companies to publicly disclose their use of conflict minerals that originated in the Democratic Republic of the Congo (DRC) or an adjoining country.

This is great news for investors! The rule mandates that companies provide the information needed to make sound financial investments and to ensure that the companies in which we invest are not associated, either directly or indirectly, with significant human rights risks associated with conflict minerals.

The US Chamber of Commerce had sued the Securities and Exchange Commission seeking to strike down both the conflict minerals provision of Dodd-Frank and this SEC rule. The lawsuit claimed that the conflict minerals rule was arbitrary and that the public disclosure requirement violated company’s First Amendment Rights.

The court disagreed. "Finding 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.”

Requiring companies “to make public and disclose annually to the Securities and Exchange Commission if the minerals in their products originated or may have originated in Congo” will help “to ensure activities involving such minerals did not finance or benefit armed groups.” 156 Cong. Rec. S3976 (May 19, 2010) (statement of Sen. Feingold).

Over the past three years, during the rule making process, 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. Key components from the investors’ letters were included in the final rule. Copies of the recommendations to the SEC and a list of the investor organizations that signed on to the letters are available at http://www.sourcingnetwork.org/investors/.

While this is a big win for the sustainable, responsible, impact investment community, many corporations are ill-prepared to implement the SEC's conflict minerals disclosure rule. Here are stats from a PwC survey pulled from ELM Consulting Blog:

  • 26% of the respondents did not know if the rule was even applicable to their companies.
  • 58% of respondents see this only as a compliance exercise and don't anticipate additional value from the required efforts.
  • 26% of respondents have not established a conflict minerals policy or feel it isn't applicable.
  • For those that have gathered some data on their suppliers, 54% of the respondents could not determine if minerals originated from covered countries or not.
  • Almost 27% of respondents plan on relying solely on due diligence information received from suppliers; 58% don't know if they will extend their efforts beyond their Tier 1 suppliers.

First Affirmative applauds all who worked on the case and encourages all companies using these minerals to source them responsibly and to communicate with investors in a transparent fashion.

Mention of specific companies or securities should not be considered a recommendation to buy or sell that security. Past performance is no guarantee of future results.

Posted: August 19, 2013