Two activist groups have sued the London Metal Exchange for allowing metals produced in environmentally damaging ways to trade on its marketplace, allegedly breaking UK laws against handling the proceeds of crime.
The two non-governmental organisations — the Global Legal Action Network and the London Mining Network — are not seeking damages but their lawsuit is seeking to force the 147-year-old LME to change its stance on the metals it allows to trade on its exchange.
Specifically, they point to “problematic” mining practices in Indonesia, Brazil, Peru, Guinea and Russia, where the production of those metals would breach criminal law if they were to occur in the UK.
If successful, their claim could have implications for companies such as the London Stock Exchange, which lists a large number of mining companies.
The LME already has standards for “responsible sourcing” for metals trading on the exchange, requiring producers to provide evidence that they meet OECD guidance on supply chain due diligence. Producers must also show they have an environmental management system in place.
Yet the LME doesn't have any standards around the environmental impact of metal production. The NGOs are seeking to change that.
An LME statement said the exchange believed the claim was “misconceived”.
“The LME’s brand listing requirements reflect the international consensus on best practice in respect of ethical and sustainability issues,” the spokesperson said in a statement.
While the LME has held discussions with market participants on introducing additional environmental requirements, it said there was no global consensus yet on taking further measures.
The success of the lawsuit could deliver positive benefits to Australian metal producers.
Currently, the LME makes no distinction between the pricing of nickel produced under Australia’s more stringent environmental, social and governance (ESG) standards and what Andrew Forrest terms “dirty nickel produced in Indonesia”.
Forrest’s Wyloo Metals, which is shutting its WA nickel mines, is hoping for a shake-up of the LME and the emergence of a green premium for nickel.