Ethical puts AIDS on the SRI radar

(July 27, 2005) Canadian mining and resource companies that make up a significant part of the S&P/TSX Composite Index are operating in countries with some of the highest rates of HIV/AIDS infection in the world. The Ethical Funds Company has conducted a preliminary review of those companies as part of its effort to benchmark current practices and determine the extent to which companies are assessing risks and implementing strategies to protect the health of workers and the viability of their businesses.

With the exception of a few companies that Ethical holds up as notable exceptions, it says overall, resource companies are not giving sufficient attention to HIV/AIDS or its potential impact on the workplace, capital markets and political stability.

In a report entitled Canadian Energy and Mining Companies and the HIV/AIDS Epidemic — Bridging the Chasm, the Ethical Funds company outlines risks like loss of human capital, declining household spending, diverted investments, constraints on national budgets, declining labour productivity, rising healthcare costs and lower profitability that AIDS can have on businesses operating in high risk countries.

To conduct the review, Ethical surveyed 41 mining companies with a total market capitalization of $250 billion, nearly 23% of the S&P/TSX Composite Index. Of the 17 companies that responded, only nine said they incorporated an HIV/AIDS review as part of their risk assessment process. Only seven companies surveyed have formal HIV/AIDS policies in place.

Surveys in Zimbabwe in 2000 found that 65% of households disintegrated after losing an adult woman to the disease. In Zambia, two thirds of families where the father died, saw monthly disposable income decline by 80%, and per capital household incomes among the poorest residents of Botswana, are expected to fall by 13% over the next 10 years.

The downward spiral will be further intensified in Uganda and Malawi, where nearly one third of all teachers are HIV positive. Along with this, the probability that children will contract the disease as adults, makes investment in their education less attractive.

Despite this, only seven companies said the epidemic was at least “a minor problem” for operations. Ethical says only one company increased the severity ranking from “a minor problem” to “a significant problem” when asked if their view would change in the next ten years.

At the company level, a high incidence of AIDS in the workplace leads to increased absenteeism, high turnover, loss of skilled workers, increased training and declining morale. This in turn leads to increased costs, declining profits and declining overall competitiveness.

Going forward, experts predict the next wave of infection is due to hit emerging markets like China, India and Russia the hardest.

Ethical says companies operating in these regions need to review their operations to identify the risk HIV/AIDS poses to their businesses. “We believe these companies have an opportunity to exercise both a social and financial responsibility to respond,” say the report’s authors.

The report goes on to recommend 10 points that companies can consider in creating an effective HIV/AIDS strategy.

Some companies may balk at the costs associated with some of the recommendations, but steps like providing anti-retroviral therapy (ART) to employees and families, are becoming increasingly cost effective as employee infection rates near 25% at some companies, and as ART drug treatments become cheaper and simpler to administer.

Lionore, a nickel mining company which owns 85% of a mine located in Botswana, says the company found HIV/AIDS costs, without medical intervention, would amount to approximately 10.7% of salaries. The benefits of fully sponsored treatment are estimated to exceed the costs of the program by realizing three additional years of productivity per HIV positive patient.

Of the few companies that have official plans, policies and strategies in place, some say health program costs are simply a necessary part of doing business in developing countries.

Notable companies, including Anglo American, Alcan and Barrick Gold, provide occupational health centres, testing and condom distribution, peer education and intervention programs for contractors and local communities as well.

Anglo American aggressively promotes voluntary counseling and testing by all employees and provides free treatment to employees and their families. Alcan incorporated treatment programs after acquiring Aluminum Pechiney and its initiatives in 2004. Placer Dome has committed to a pilot ART treatment programs at its South Deep mine in South Africa.

Among its list of recommendations, Ethical suggests companies conduct an impact assessment to determine the extent to which HIV/AIDS has taken hold in their communities and commit to annual assessments to project future prevalence rates, establish comprehensive and responsive policies, recognize treatment as a human right and take responsibility for acting on the problem with the support of top executives, implement zero tolerance policies for discrimination and take all necessary steps to reduce social stigmas faced by HIV positive employees.

The complete list of recommendations can be found in the report on the Ethical Funds website.

Filed by Kate McCaffery Advisor.ca, kate.mccaffery@advisor.rogers.com

(07/27/05)

Kate McCaffery