Canada’s conflict minerals reporting guidance, introduced in April 2022, has quietly but steadily shifted expectations for institutional investors operating in and around extractive industries. While much of the early discussion focused on producers and manufacturers—the more obvious targets of such regulation—it has become clear over the past year that institutional investors themselves now face a different, perhaps less clearly defined, set of obligations. Not regulatory in the direct sense, necessarily. But certainly in terms of how their fiduciary duties intersect with emerging expectations on ethical sourcing and supply-chain transparency.
In practice, this means portfolio managers can no longer afford to treat conflict-mineral exposure as merely an operational detail buried within corporate disclosures. There’s growing pressure, from clients and advocacy groups alike, for investors to demonstrate active scrutiny of their holdings, especially where these intersect with supply chains known to source from high-risk regions. The guidance itself stops short of mandating specific actions for institutional investors. Yet it does encourage them to consider the provenance of minerals linked to companies in their portfolios. This, in turn, has driven greater use of third-party data resources—chief among them the open data provided by initiatives like the Conflict Free Sourcing Initiative (CFSI), or CFG as some prefer to call it.
CFG’s datasets have become an important tool for portfolio screening, even though they come with caveats. They offer smelter- and refiner-level information that can, when used carefully, help investors map possible conflict-mineral exposures across complex supply chains. But the data’s utility hinges on a level of granularity and verification that isn’t always consistent across reporting entities. And this has left some portfolio managers hesitant, unsure of how heavily to weight CFG data when screening asset managers’ holdings or evaluating potential new investments.
There’s also, if one is honest about it, a degree of variability in how seriously different funds take these obligations. Some have embedded conflict-mineral reviews into their broader ESG due diligence processes, cross-referencing CFG lists with supplier disclosures and company sustainability reports as a matter of course. Others still treat it as an optional add-on, something to be addressed only when a specific client or stakeholder raises the issue. That inconsistency is becoming harder to defend, particularly as more ESG-focused indices and ratings bodies begin to factor conflict-mineral exposure into their assessments.
What’s emerging, slowly and unevenly, is a kind of informal standardization around the tools and templates portfolio managers use to collect relevant data. ESG questionnaires, for instance, have evolved to include targeted sections on conflict minerals, drawing on CFG references to help frame the right queries. These questionnaires, once little more than tick-box exercises in some cases, are starting to reflect a deeper engagement with supply-chain risks. Typical sections now ask asset managers to identify smelters in their supply chains, describe due-diligence processes for high-risk geographies, and provide links to their conflict-mineral policies and public reports. But designing these templates isn’t as straightforward as it sounds. There’s a fine balance between asking for information that is meaningful and overwhelming respondents with requests they may struggle to fulfill—or, worse, that produce boilerplate answers devoid of actionable insight.
And here’s where things get tricky. Not all suppliers or investee companies are equally forthcoming, and not all asset managers have robust processes for gathering this information from their portfolio companies. The result can be ESG disclosures that are patchy at best, leaving portfolio managers to piece together incomplete pictures of supply-chain risk. CFG data helps, to a point, as do the increasing number of open-source tools and databases aimed at supporting conflict-mineral due diligence. But these are not a substitute for direct engagement with companies or for setting clear expectations about the level of transparency required.
Many portfolio managers find themselves in a challenging position. They are expected to act as both analysts and enforcers, evaluating complex, often opaque supply chains on the basis of imperfect data. At the same time, they must navigate the commercial realities of their role—maintaining relationships, managing competing priorities, and balancing ethical considerations against financial performance. The Canadian guidance, while well-intentioned, hasn’t entirely resolved these tensions. If anything, it has highlighted them. But perhaps that was inevitable. Conflict-mineral reporting is, after all, not just a technical compliance issue. It is a window into deeper questions about how capital markets can and should influence corporate behavior in pursuit of ethical sourcing.