Josephine Moulds from The Bureau of Investigative Journalism, Julia Evans from the Daily Maverick and Ed Stoddard contributed to this investigation, which is coordinated by Voxeurop with the support of the Bertha Challenge fellowship.
“In our cynical society, it is often the case that mining companies build up their profits while not reporting to their shareholders the environmental and social costs that are absorbed by the surrounding poor and disempowered communities.” In Johannesburg, Mariette Liefferink was brimming over with this inflamed thought as she composed a letter to the US-based bank J.P. Morgan to express her outrage at the company’s misdeeds.
Liefferink, who is president of the South African NGO Federation for a sustainable environment, addressed her letter to Chuka Umunna, global head of sustainable solutions at the world’s largest asset manager. She was warning the former British Labour MP-cum-ethical banker that J.P. Morgan’s supposedly green investment funds are in fact financing water pollution in her home province, instead of ensuring clean water and respect for human rights. In Mpumalanga, which borders Mozambique and Eswatini in the east of South Africa, people have been thirsty and unwell for decades because of dirty coal mining.
Liefferink maintained a civilised tone in her letter: “It is trusted that this disclosure of alleged non-compliance with environmental legislation, pollution, ecological degradation and environmental risk, will incline you to conduct a due diligence process to determine whether Glencore’s South African operations are compliant with JP Morgan’s criteria for funding”.
Will J.P. Morgan’s ‘just transition’ prophet care for water pariahs ?
The son of a Nigerian former businessman and Irish-English mother, London-born Chuka Umunna was promoted to his current role in July 2024, having joined the US bank in 2021. At the time, he was the lead adviser on the firm’s environmental, social and governance (ESG) efforts in Europe, the Middle East and Africa. Umunna’s role is to help the Wall Street titan’s clients around the world improve their sustainability performance.
Self-styled eco-conscious Umunna may have missed or overlooked the Johannesburg-based activist’s complaint. The image he likes to convey in his public speeches on sustainable business does not seem to apply to South Africa (and probably to all squandered countries of the Global South). Take, for example, this quote from one of his early interviews since he took office at J.P. Morgan: “People who work in financial services are human beings as well,”he said. “I’ve got a one- and a four-year-old and I genuinely do worry about what we will be bequeathing the future generations.”
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He was even more explicit in this youtube interview “It’s the other side of the fence of actually trying to change the world, I don’t want it to sound too grand but that’s what this bank is in the business of doing.”One wonders if Umunna was thinking of changing the world for the better for future generations of South Africans deprived of their right to water when he spoke his words of wisdom.
In her message, Liefferink referred to J.P. Morgan’s green-labelled share and bond holdings in Glencore, the world’s largest multinational mining company, which is based in Switzerland and listed on both the London and Johannesburg stock exchanges. She cited reports, obtained confidentially from the South African government, which allegedly prove that Glencore has relentlessly released excess toxic pollutants into the water system on which locals, mostly from lower-class black communities, depend for drinking, fishing, farming and cattling. She argued that Glencore’s wrongdoing was not consistent with the sound water management promoted by J.P. Morgan’s green funds.
Watch Mariette Liefferink explaining Glencore’s operations in Mpumalanga in the Voxeurop Live on Green Finance:
And yet the pension fund set up by J.P. Morgan for its UK staff (which provides a lavish allowance for current and future retired managers, including Umunna himself) and financial groups investing in Glencore’s green funds might well profit from the greenwashing of water pollution in South Africa, despite all the talk of responsible investment.
Umunna works for JPMorgan’s investment bank rather than the asset management arm that runs these funds. In that role, he says, he oversees “JPMorganChase’s sustainability strategy across EMEA and the franchise’s own efforts to integrate sustainability into its own operations and business activities in the region”. He did not respond to Liefferink’s email. This is unsurprising, since J.P. Morgan has an established trusted relationship with Glencorethe US bank has also arranged all of its bond issuances (which are essentially loans – a key way that Glencore makes money) and has often advised investors to buy Glencore stocks.
J.P. Morgan champions (un)sustainable investing in Glencore
EU legislation on green finance (the Sustainable Finance Disclosure Regulation, known as SFDR), which came into force in 2021, requires asset managers to disclose both the environmental and social benefits and negative impacts of the activities in which they invest. But the hope that greater transparency would encourage investors to shift capital to more sustainable investments has often been frustrated by financial institutions’ misleading tactics. Exploiting loopholes in the regulatory framework, asset managers have massively channelled investor money into investment products marketed across Europe to greenwash destructive activities.
With 16.7 million tonnes of direct carbon emissions in 2023, Glencore is one of the world’s biggest greenhouse gas emitters. It attracts investment through funds promoted as ESG products (environmental, social and governance improvements), as our research has shown. The value of the Swiss multinational’s shares and dividends skyrocketed throughout 2022 as Europe was suddenly forced to replace Russian gas with other energy sources in the wake of Vladimir Putin‘s full scale invasion of Ukraine.
The EU market has exponentially increased its coal imports from South Africa. Dozens of asset managers seized the opportunity to boost returns on their green investments by buying and selling shares and bonds in the Swiss mining giant. In doing so, they hid the harmful effects of coal behind bespoke due diligence methodologies, ensuring that their portfolios were formally compliant with lax EU requirements.
Since the European law on green finance, or SFDR, came into force in the second quarter of 2024, asset managers have invested an average per trimester of $790 million in Glencore through their green funds. These include $798.5 million invested through two mislabelled products according to the new fund naming guidelines adopted in May 2024 by the European Securities and Markets Authority (ESMA). Prior to 2022, most of the 10 asset managers who profited most from their green fund investments in Glencore made losses. They’ve made almost $570 million since the start of the Russia-Ukraine war when Glencore’s shares value and dividends peaked (as explained above), in February of the same year, with only a few making modest returns of around $13 million before that.
J.P. Morgan ranks second in the global “green-painted” rush on Glencore’s stock market. Its UK subsidiary has marketed investments worth an annual average of $54.8 million and has continued to buy shares in the Swiss company relentlessly. Its exposure, which is greater than that of any other asset manager, increased by $14.15 million between the first and second quarters of 2024. The latest available data from the second quarter show that J.P. Morgan holds a total of $43.34 million worth of shares.
Over 20% of this value is held in the two funds with the ESG label, which ESMA guidelines prohibit for investments in fossil fuels such as coal (1).
More than 20% of Glencore’s “green” investments ($57.3 million) held by the 10 most exposed funds (marketed by various asset managers) are currently in the hands of J.P. Morgan, whose questionable sustainable bet on Glencore goes beyond the stock market. From the beginning of the all-out Russian invasion of Ukraine (in the first quarter of 2022) until the second quarter of 2024, JP Morgan may have made up to $46 million by adding $7.7 million Glencore shares to its investments. The US bank has also lent Glencore $203 million through green funds which underwrote corporate bonds issued by the Swiss company between 2021 and 2024. Those funds re suspected of having directly subsidised Glencore’s coal operations in South Africa.
All of J.P. Morgan’s green funds replicate similar EU-required sustainability disclosure documents (based on a common template), albeit under different names and investing in different sectors and regions. This allows the offering to be diversified and tailored to investors’ needs, while following the same ESG strategy.
Water pollution makes a mockery of public law and health
Nine-thousand kilometres from Umunna’s desk, in the southern hemisphere, J.P. Morgan’s investments look a lot less green. Water overuse and pollution from coal mining is one of the main causes of the chronic water crisis affecting more than 4.2 million people living around the Olifants River catchment in Mpumalanga. Until recently, this scourge was in the news (2) in eMalahleni (“the place of coal” in the indigenous isiXhosa language). Located 100 km east of Johannesburg, it is the third largest municipality in the province with a population of 450,000.
The supply system does not meet minimum drinking water quality standards due to the widespread infiltration of chemicals, making residents ill, mostly with diarrhoea. Most of the pollution comes from the dozens of South African active coal mines (in addition to those that have been closed but not decontaminated), which account for around 90% of the country’s coal production. Over the years they have also devastated the fertile wetlands and aquatic life on which people’s livelihoods depend, a coal-driven disaster several scientific studies have proven (3).
eMalahleni administration states that it has been “unable to exploit groundwater resources due to underground coal mining”, resulting in the “emission and dispersion of acid mine drainage”. This is despite the fact that it has committed to improving the safety of the water, much of which comes from the Olifants catchment area.
Glencore, one of South Africa’s largest coal producers with three wholly-owned and joint venture operations, operates its largest mine (and the country’s third largest in 2021) about 20km south-west of the regional capital, eMalahleni. The Tweefontein mine, which is partly open pit and partly underground, has increased its production to almost 20 million tonnes per year, according to South African Department of Water Sanitation (DWS) data for 2021.
In 2019, the activist law firm Center of Environmental Rights (CER) included Tweefontein and Goedgevonden (also owned by Glencore) on its blacklist of South African coal mines which it believes violate national water laws. Compliance with the water management and quality requirements attached to the mining licence is a mandatory condition for continuing operations. Despite this, the management of the Tweefontein mine seems to have made little progress and to have defied repeated warnings from the national authorities to provide effective wastewater treatment, and to stop the excessive pollution that is affecting the supply of clean water to downstream communities.
The government has taken no coercive action to force Glencore to comply fully. “Our regulators are often compromised and give in to the pressure of the coal mining industry,” Mariette Liefferink told Voxeurop.“ They furthermore do not have the political will to enforce our laws.”
The South African activist secured evidence to confirm Glencore’s persistent illegal activity through Freedom of Information (FOI) requests to the Department of Water and Sanitation (DWS), the government agency responsible for these matters. The DWS provided her with exclusive records (seen by Voxeurop), detailing the trail of fraud observed by public inspectors since 2017.
Some of the violations also seem to affect Glencore’s two other mines in the country (Goedgevonden and iMpunzi). According to a 2021 monitoring report, many prior violations identified at the Tweefontein site appear to be still unresolved (4). In particular, several pollutants discharged into the Tweefontein Spruit, a river which flows through the Tweefontein mining concession, continued to exceed the concentration limits set out in the Water Use Permit, which is on the way to be renewed nonetheless.
The same applies to the other rivers (Zaaiwaterspruit, Klippoortjiespruit and Rietspruit) that the Tweefontein River crosses outside the mine boundaries. These contaminated rivers are tributaries of the wider Olifants River (managed by a special authority), whose catchment area is the most important in the province, providing water for domestic use, fishing, agriculture and ecosystems stretching as far as the iconic Kruger National Park. A follow-up inspection in 2023 found that, despite some improvements, contaminated run-off and toxic deposits seem to remain at the mine, and that Tweefontein’s water once again would not meet sufficient quality standards to be released from the reservoir into the water supply network.
In March 2024, the site manager of the Tweefontein Complex sent a letter to the DWS committing to the effective implementation of the revised remediation plan agreed with the department following the previous year’s inspection.
“The Department is currently monitoring the implementation of the action plan and will be conducting the inspection during the last quarter of 24/25 financial year,” said the DWS in response to our inquiry. “if there are serious discrepancies between what was planned and what is being implemented then more serious actions could be required to force compliance.”
Glencore declined to comment on the issue which follows other environmental and human rights controversies in which the world’s leading coal, copper and zinc producer has been involved over the years, mainly in Peru and Colombia.
Locals speak up on Glencore’s dirty and insufficient water
Tweefontein mine’s water usage license requires Glencore to treat the water it uses and return it to the community at drinkable standards.Glencore claims that since 2018 Tweefontein Water Treatment Plant has been supplying clean drinking water to Mpumalanga’s coal belt, including the nearby the mining towns of Phola and Ogies, comprised in eMalahleni municipal boundaries.
The plant transforms underground mine water into potable water. Glencore’s website states that the Tweefontein Water Treatment Plant “has addressed critical water challenges for the long term in our Phola and Ogies communities” and that it “continues to supply clean water to the eMalahleni Local Municipality.”
But residents allege this isn’t happening, many still experience intermittent supply or quality issues. “The failure to properly treat the water comes back to the community,” said Colleen Mabelane from Mining Affected Communities United in Action (MACUA).
A few months ago researchers from the University of Witwatersrand came to test the water in Phola. “We have not had a chance yet to follow up with MACUA yet. Until such time,we are not in a position to share the results outside of the community,” said Prof. Andrew Thatcher, Chair of Organisational/Industrial Psychology, leading the weather sampling team.
We heard from anonymous sources that the tests showed nothing alarming. It is worth noting that the University of Witwatersrand has ties with Glencore which has sponsored its graduate students and hosted some of them at Tweefontein’s mine. Matthews Hlabane, founding member of the South African Green Revolutionary Council, has also recently performed tests with his fellow activists, The results showed contamination and acid mine drainage.
Whatever the two contradicting lab analyses say, dwellers in Phola don’t trust the water: “The water is polluted, and people are getting sick.” Daisy Tshabangu, 52, has lived in Phola for more than 35 years. She moved to the area because her family worked at Eskom’s Kendal coal-fired power station, which looms on the horizon. “Most people here at some point have gotten stomach aches when they drink the water,” said Tshabangu. “The colour of the water is not appetising, it’’s yellowish, brownish and doesn’t smell good.”
Phumzile, a mother who lives in Phola who wishes to remain anonymous for safety concerns [being intimidated by a powerful mine], explained, “when you open the tap, if by the grace of God water comes out that day (It’s been almost three decades now and we don’t have sufficient water running from the taps), it’s rusty, it’s smelly, it’s not something you can consume” She has also noticed that her son, now 16, started developing regular skin rashes when he was six years old. “At first, I thought it was an allergy, but then it became a pattern, that’s when I started noticing that there’s something wrong with the water; if you bathe in it, you get skin rashes.”
Esther Mthombeni, 63, who has lived in Phola since 1989, shares the same fate. “When you open the tap the water is dirty,” she said. “There’s a man who sells water who has his own purifying machine, or people buy water that comes from Witbank (former name of eMalahleni).” She said that those who can’t afford to buy water always boil it before consuming it.
“We don’t have water, and no one is taking responsibility,” said Tshabangu. “Maybe Glencore thinks that they’ve done their project very well, but there’s people who don’t get water at all, so they should follow up with the community, not just the municipality.”
“We are not directly responsible for the supply of water to Phola and cannot comment on the claims of water quality or a lack of water which is a Municipal Service,” Glencore’s spokesperson clarified “The Glencore Coal South Africa (GCSA) water treatment plant pumps on average 10Ml/d of potable water into the municipal [… ] pipe, which contributes to the [… ]supply to the Phola municipal reservoir, the reservoir also receives water from other sources, [… ] distributed into the town [… ] by the Municipality of Emalahleni [… ], also responsible for the maintenance of the water infrastructure.
We asked Emalahleni’s public officers responsible for water management if and how they can tackle the issues raised by communities, but we had no answer.
The greenwashing show must go on
What happens on the ground does not seem to be on J.P. Morgan’s radar. Instead of conducting first-hand surveys like any other asset manager. The US bank prefers to rely on data collected from investee companies and third parties to quantify the impact (negative or positive) of its self-proclaimed green investments. A key data source is the rating agency MSCI, which gives Glencore an average score for ESG risks, but a minus for alignment with the Sustainable Development Goals.
In the sustainability disclosure documents attached to its funds, J.P. Morgan admits that it cannot “guarantee the accuracy, availability or completeness of its proprietary system or third-party data”. And indeed, neither the asset manager nor the ESG analysts would have had a chance of discovering the Tweefontein mine’s excessive water pollution had Glencore not taken the initiative to inform them.
As a result of flawed due diligence (overlooking unreported cases), J.P. Morgan has so far reported a positive impact for its green funds, despite the fact that investors have potentially profited from Glencore’s water devastation in South Africa. What is more, investor money has likely been poured directly into this environmental scourge through the purchase of the company’s corporate bonds. In fact, the Swiss mining giant’s bond prospectus explicitly lists the main company’s mining operations, including the Tweefontein mine. This means that the proceeds could be used to finance any of those activities. Glencore’s spokesman refused to clarify how much of the proceeds went or may go to the company’s South African operations. “Proceeds are used for general corporate purposes,” he said.
J.P. Morgan’s green funds are officially committed to, among other things, “protecting internationally proclaimed human rights and reducing toxic emissions”. These combined claims imply that companies in the portfolio do not hamper access to clean water, which is recognised as a human right under international law, including through the implementation of water decontamination (5), and is enshrined in the South African constitution.
These promises are advertised in all the funds’ sustainability disclosure documents, which claim to meet their commitments by excluding companies involved in harmful activities, including coal. However, J.P. Morgan’s exclusion policy allows investments in companies that derive less than 20% of their revenue from coal production or distribution. This exemption leaves room for greenwashing. As a J.P. Morgan spokesperson told Voxeurop: “MSCI ESG Manager shows that Glencore has 9.79% exposure (i.e. to coal)”, making it a perfect “sustainability” candidate.
According to Glencore’s annual report 2023, coal is only 6% of the company’s total revenues. However it accounts for almost half of its profits which represent the amount actually earned, after subtracting operating and other expenses.
In addition, the fund’s policy excludes companies that violate relevant OECD and UN standards requiring avoidance of freshwater degradation, mitigation of environmental herm and remediation of local stakeholder grievances (6). However, this exclusion is limited to companies included in the tiny portion of J.P. Morgan’s funds that qualify as fully ‘sustainable’. According to EU rules, this portion can only include activities that do not harm key environmental objectives (according to the Taxonomy Regulation), such as water protection and pollution prevention.
The J.P. Morgan spokesperson declined to clarify whether this portion, or at least the broader ESG portion that helps achieve some of the fund’s objectives (environmental and/or social characteristics), includes Glencore, which may even be outside of both. These two subsets of investments represent at least 20% and 51% respectively of the two funds mislabelled as ESG, while they may represent a smaller or larger proportion of the other funds’ portfolios. Despite these minimalist thresholds, J.P. Morgan’s attracts investors’ attention by using the appealing phrase “sustainable investment funds” on its marketing website.
Nicola Koch, head of the 2° Investing Initiative (2DII), an independent, non-profit think tank working to align financial markets and regulation with the goals of the Paris Agreement, points out the irony: the “crazy consequence of the loopholes in the EU legislation is that asset managers can theoretically invest the non-ESG portion of their funds in companies that do not meet international standards”.
ESG data-driven tactics hide reality on the ground
In an email to J.P. Morgan’s investor relations department, we mentioned Mariette Liefferink’s complaint to Umunna. We asked whether Glencore’s misconduct in Mpumalanga merited scrutiny as a potential misalignment with the Green Fund’s objectives, and whether it would lead to a reassessment of the overall sustainability performance of the investments and engagement with the mining company, or even its removal from the portfolio. So far we have not received any explanation.
We know that J.P. Morgan does not prioritise water pollution when engaging with companies in its green funds, although it does include water emissions in its EU-compliant impact indicators. Such indicators are established under EU rules to measure the progress of funds towards their objectives. It is worth noting that for each indicator, J.P. Morgan quantifies the score by aggregating the impact of all companies included in all managed funds.
This means that water pollution can still show a downward trend across J.P. Morgan’s green investments, even though individual companies may fail to reduce water pollution at specific production sites. This is not to mention cases where a company does not even disclose its negative impacts, such as Glencore in relation to the Tweefontein mine.
As mentioned in the funds’ sustainability disclosure documents, J.P. Morgan’s ESG ESG assessment is based on issuer reports (alongside third-party data providers). The water-related incidents mentioned in Glencore’s 2023 Sustainability Report make no reference to the breaches at the Tweefontein mine, resulting in over-contamination. The report whitewashes the reality by stating: “We require our industrial operations to […] develop water management strategies to maximise the efficient and sustainable use of this important natural resource […] and protect access to water for other users.” The ESG scoreboard mentioned in the report adds: “We treat water prior to discharge in accordance with regulatory approvals, permits and licences”.
And yet, Glencore’s spokesperson implicitly admitted the breaches occurred at Tweefontein site. “The incidents […] identified in the 2023 audit have been completed by their respective deadlines with some longer-term actions still in progress as per action plans provided to DWS,” he said. “DWS has also indicated that they will do a follow up visit next month to verify the action plan implemented since the 2023 inspection.”
We asked the Glencore spokesperson if the complaint Mariette Liefferink signalled to the Tweefontein mine manager (before informing Chuka Umunna) was escalated to the highest corporate level to trigger investigations and remedial action, in line with the monitoring mechanism outlined in the company’s sustainability report and bond prospectus (7). We also asked whether the controversy had been communicated to both bondholders and shareholders (including J.P. Morgan’s green funds). We were told that the case was being kept confidential.
We shared our findings on Glencore’s activities in South Africa with J.P. Morgan and asked them to comment. “We decline to comment beyond what’s in the public domain,” said the company’s spokesperson, refusing to answer our questions.
Officially, J.P. Morgan may pretend to be unaware of the reality on the ground.
But their compliance department has been informed by Liefferink, as has Chuka Umunna.
Stefano Valentino is a Bertha Challenge Fellow 2024
👉 The investigation on the Observer, The Bureau of Investigative Journalism and the Daily Maverick
FOOTNOTES
1) J.P. Morgan ESG-labeled green funds
Global Research Enhanced Index Equity ESG
Europe Research Enhanced Index Equity ESG
2) Local news
3) Scientific studies
https://www.sciencedirect.com/science/article/abs/pii/S1464343X21001552
https://www.sciencedirect.com/science/article/pii/S0075951123000919
https://www.sciencedirect.com/science/article/pii/S0925857424002490
4) Report of DWS inspection held on October 18, 2021
The mine is not complying with National Environmental Management Waste Act, 2008 (Act 59 of 2008) National Norms and Standards of Storage of Waste 29 November 2013
The position of the DWS based on the records is that the mine has contravened the provision of National Water Act, 1998 and conditions of the WUL (Water Use Licence).
Water quality within the streams exceeds WUL limits. BOSR-01 have high EC, Cl and SO4. WISR-04 have high concentration of EC, Ca, Mg, Cl, SO4 and low pH. WISR09 have high EC, SO4, Ca, Cl, Mg, K, Na and Mn.WISR-06 have high concentration of Cl, Mn and EC.
The human right to safe drinking water was first recognized by the UN General Assembly and the Human Rights Council as part of binding international law in 2010.
6) Guidelines for Multinational Enterprises on Responsible Business Conduct
Enterprises should also avoid and address […] freshwater degradation
The key to a precautionary approach, from a business perspective, is the idea of prevention rather than remediation. In other words, it is more cost-effective to take early action to ensure that environmental damage does not occur.
UN Guiding Principles on Business and Human Rights
Operational-level grievance mechanisms […] are typically administered by enterprises. […] These mechanisms make it possible for grievances, once identified, to be addressed and for adverse impacts to be remediated early and directly by the business enterprise, thereby preventing harms from compounding and grievances from escalating.
Grievances are frequently not framed in terms of human rights […]. Regardless, where outcomes have implications for human rights, care should be taken to ensure that they are in line with internationally recognized human rights.
7) Prospectus of the 144A Issuances program and EMTN program
The Group also has mechanisms in place to receive grievances and concerns. The Group aligns its grievance mechanisms with the requirements of the UN Guiding Principles on Business and Human Rights. Senior operational and departmental management and the Board’s health and safety, environment and communities committee receive regular reports on grievances and concerns. All grievances and concerns received are registered and investigated, and the Group notifies complainants of the results of their grievance