Extractive Industries for Development #21

June 17, 2011— Mining projects in developing countries are increasingly expected to deliver sustainable benefits to local, regional, and national stakeholders. Many governments and companies have been considering the use of foundations, trusts, and funds (FTFs) as vehicles for sharing the benefits of mining operations with the surrounding communities. To achieve sustainable benefits, however, mining FTFs need to be integrated into the local context.

Introduction

With more than 60 mining FTFs operating in the developing world, there is a vast breadth of experience in using these structures to share the benefits of mining. This report has sought to expand the knowledge base around the use of FTFs in the mining sector given the clear demand for additional knowledge and expertise in this field.

Background

From experiences with corporate philanthropy using FTFs in the United States in the 1930s to the modification of taxation arrangements through FTF structures in Peru in 2007, the mining industry has used FTFs to achieve various goals and to share benefits through royalty payments to governments, compensation payments to affected individuals and communities, and community investment programs. (More information on the Background Research and Case Studies.)

Six Criteria for Comparing FTFs

The legal definitions of FTFs provide little assistance in their comparison because they are so varied. To facilitate meaningful comparisons, this report identifies six criteria against which FTFs can be evaluated. These include:

• Programming approach
• Financing structure
• Geographic focus
• Community participation in governance
• Influence of mining company
• Influence of government

Some Key Conclusions of the Report Include:

• There is no standard approach to mining FTFs—experience around the world is varied and difficult to compare.
• One critical condition for success is evident: adaptation to the local context.
• Adaptation is presented in three distinct components: complexity, context, and integration.
• The complexity of the FTF should be proportionate with the funding and capacity of the operating environment.
• The context needs to be well understood through extensive social assessment in order to appropriately define the vision, beneficiaries, and projects to be supported by the FTF.
• FTF should then be well integrated with local and regional development plans.