After more than two years of pressuring Vedanta to improve its ESG performance and less than a week after the Indian government rejected the miner’s plan to develop a bauxite mine in India, the UK-based Local Authority Pension Fund Forum (LAPFF) hit out at the company for ignoring shareholder concerns.

Highlighting Vedanta’s recent share price fall – the miner’s stock plunged more than 10% from £20.16 ($30.98) to a five-day low of £17.95 in the days following its unsuccessful mine bid – the forum, which brings together 52 funds with assets of around £90 billion, said such stock price trends demonstrate "the financial risk inherent in poor management of social and environmental impact issues”.

The Indian government blocked Vedanta’s mine plans because of concerns over environmental degradation and the impact on local tribespeople.

The LAPFF has been lobbying the mining firm over its activities since 2008, with initial concerns over the planned bauxite mine extending to wider discomfort about the company’s corporate governance and management of shareholder relations.

Vedanta has been criticised by NGOs and shareholders in relation to pollution, environmental destruction and the impact of the miner’s activities on local tribespeople. The forum called on Vedanta to implement the International Council on Mining and Metals sustainability development framework and to appoint an independent non-executive director.

The forum said the rejection of the proposed bauxite mine is a “success” for campaign groups but added investors want greater governance reforms “in order for the company to recognise that underlying ESG issues are fundamental in determining long-term value”. 

“The Forum has witnessed how certain companies have benefitted from recognising the financial relevance of environmental, social and governance issues, which investors are naturally interested in,” said Ian Greenwood, LAPFF chairman.

“The Vedanta experience is clear evidence of why laggards ignore these matters at their peril and to the detriment of their shareholders. Good management of these issues can clearly have a direct impact on business strategy and, by extension, financial performance.”

Meanwhile, in further indication of disquiet, local media this week reported operations were temporarily halted at a Vedanta-run refinery in India after thousands of workers ransacked the facility in a dispute over employment contracts.

Vedanta did not respond to requests for comment before press time.

Charlotte Dudley