YANGON: Posco International Corp is one of the last foreign companies with a significant stake in Myanmar’s oil and gas sector, despite the industry’s ties to a military regime that has been widely condemned for violations of human rights.
The South Korean company also retains a holding in nearly a dozen environmental, social and governance (ESG) focused funds, including those run by BlackRock Inc, State Street Corp and Samsung Asset Management Co, according to Bloomberg data on the latest available filings.
While Posco International derives just a small fraction of its global revenue from Myanmar – less than 4% comes from its energy business overall – its inclusion in ESG funds reflects a dividing line between investors on the issue of human rights.
It also demonstrates how ESG investors’ reliance on ratings agencies and index funds can limit scrutiny of specific areas of concern.
BlackRock and State Street declined to comment. Some fund managers, including a representative from Samsung Asset Management, said funds that include Posco track market indexes, while others use ESG ratings to assess their holdings.
Posco International, a subsidiary of the South Korean steelmaker Posco Holdings Inc, is the majority shareholder of one of Myanmar’s largest natural gas fields, which generates as much as US$400mil (RM1.77bil) for a military-controlled state-owned enterprise every year, according to Thomas Andrews, the United Nations special rapporteur on the situation of human rights in Myanmar.
During a visit to South Korea in November, Andrews urged companies to make sure their operations don’t directly benefit the junta in Myanmar.
Since its military seized power in a coup nearly two years ago, Myanmar state entities have been sanctioned by the United States and the European Union (EU). The government has been found guilty of violence against civilians, detention of the press and capital punishment.
“There are a lot of grey areas you can argue or we can argue,” said YK Park, head of responsible investment and governance in the Asia Pacific for Dutch pension fund APG Asset Management. “But this whole Myanmar issue wasn’t a grey area for me – for us.”
APG was one of the first and most outspoken advocates for corporate withdrawal from Myanmar.
After the coup, the €524bil (RM2.47 trillion) fund urged its major holdings in the region, including Japanese brewer Kirin and Posco C&C Co, another subsidiary of Posco Holdings, to exit relationships with military associations in the country. Both have since announced their exit from joint ventures with military-affiliated companies.
According to Posco Holdings, an ESG council of the top five Posco Group affiliates requested on-site due diligence into Posco International’s business in Myanmar and its alignment with the company’s human rights policy.
“Due diligence is underway on the Myanmar business site,” a spokesperson said in a statement, “and we will disclose the results in the sustainability report next year.”
At present, Posco International retains a 51% stake in the Shwe gas field and a partial stake – 25%, according to The People’s Map – in the South-East Asia Gas Pipeline.
The company’s first-quarter earnings report shows planned development on the Shwe project through 2024, with another report from last year noting capital expenditures at US$788mil (RM3.49bil).
Both projects are jointly held with the state-run Myanmar Oil and Gas Enterprise, which was sanctioned by the EU in February for providing “substantive resources” to the Myanmar Armed Forces.
Between April and July of this year, a state newspaper reported, Myanmar’s government earned US$800mil (RM3.5bil) on natural gas exports. Since the coup, almost half a dozen multinational companies have withdrawn from energy projects in the country, including TotalEnergies SE and Chevron Corp.
“The Shwe Project serves as a main gas source for the central-northern region of Myanmar and any issue with its operations may bring real and tangible disruptions to the daily life of people in the country,” Posco International said in a statement, adding that the ongoing development had been planned since 2010. — Bloomberg
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