Mining industry has room to grow on ESG

The latest expert webinar from Mining Beacon has revealed worrying opinions on the mining industry's implementation of environmental, social and corporate governance.

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The latest expert webinar from Mining Beacon has revealed worrying opinions on the mining industry's implementation of environmental, social and corporate governance (ESG).

Five acknowledged experts on ESG joined an on-line panel hosted by Mining Beacon, organiser of the IMARC and Mines and Money conferences, to discuss whether the mining industry is doing enough to implement ESG at the ground level.

In a poll of listeners to the webinar, only 5% said the mining industry was doing enough on ESG at ground level, with 58% saying there was insufficient progress (37% of respondents said they were unsure). The panel (moderated by Andrew Thake, the Head of Content for Mines and Money) agreed that the industry was not doing enough, although they reported plenty of encouraging developments. 

Adam Matthews, Director of Ethics and Engagement for the Church of England Pensions Board, commented that environmental and social responsibility was crucial, especially for an industry as important as mining. He warned, however, that there was considerable divergence in application across the sector, and there had been worrying recent developments, especially over tailings-dam failures.

Aidan Davy, COO of the International Council on Mining and Metals (ICMM), agreed, and noted that ESG was at the very top of his organisation's agenda, and the member companies are expected to work to agreed performance standards.

The standards set by Newmont Goldcorp are aligned to those of ICMM, according to Elaine Dorward-King, the company's Executive Vice-President of Sustainability and External Relations. She noted that Newmont has an "overarching" policy on ESG, and that the Board has established an implementation framework for all of Newmont's operations to follow —with a specific focus on water issues and climate change.

The 'buy-in' by smaller companies is improving, according to Matt Fifield, Managing Partner at Pacific Road Capital, and ESG compliance and stewardship are crucial measures in their investment decision-making process. Mr Fifield conceded, however, that survival remained the greatest concern for the smallest companies, with obtaining finance at the top of their agenda. 

Pacific Road focusses on leveraging its existing/potential investment position with its portfolio or target companies to advocate ESG stewardship to ensure long-term sustainable value creation. Elevating the ESG discussion within the boardroom and increased transparency on ESG-related issues are key focus areas for Pacific Road as it seeks to improve the ESG mindset of junior-company directors.

The Emerging Markets Investors Alliance (EMIA) is seeking to educate companies and investors, and part of this work is direct advocacy about the importance of ESG. The non-profit-making organisation's Research Director, Alexander Schay, told webinar listeners that the biggest gains for EMIA's research had been around water and energy usage.

Risks and Rewards

Matt identified the greatest risks facing the international mining industry as work stoppages, people skills and obtaining a licence to operate. The rewards facing well-managed companies were the opposite side of the same coin, ie a motivated workforce, adequate recruitment and ready processing of permit applications.

Adam identified winning back the trust of the public as the key issue in the industry's risk-reward scenario. There is, he said, a "real systemic issue" facing miners, with far too many regarding ESG as an external issue. Every CEO should have environment and social issues at the top of their agenda.

Elaine agreed, noting that companies needed to deliver on stakeholder expectations, and this means acting ahead of legislation. Mining companies must have a holistic view of their operations, and have a "beyond compliance" mindset, not just a "tick box" attitude.

Alexander commented that investors were moving towards a holistic approach to mining investments, but that they still needed to reach a point where everyone looks at everything. One area for improvement was the need for standardisation of the metrics used, for example a comparison of greenhouse gasses emitted per dollar of revenue. Matt said Pacific Road was already incorporating ESG criteria into its investment decision making and monitoring processes using several lead and lag indicators to mitigate risk and manage value.

Aidan added that rating agencies now look at ESG but the assessment is "all over the place", and the resultant ratings are not consistent.

Listeners were damning about investors, with 67% saying that they were not pushing miners hard enough over ESG implementation. In the poll, only 17% said miners were being pushed hard enough by investors.

With regard to Newmont, Elaine said investors in the company do largely understand that ESG is being taken seriously. Indeed, Newmont gets more questions about ESG than any other issue.

The picture amongst junior companies is much more variable, and 58% of the listeners to the webinar concluded that exploration companies are not yet taking ESG seriously. No-one polled said that they were taking ESG "very seriously", with 32% saying junior companies were taking this crucial issue "quite seriously". Perhaps even more worryingly, 11% of the poll respondees said "ESG didn't matter"!

These issues will be explored in even greater detail at the Mines and Money London conference on November 25-27. 

Chris Hinde

Chief Commentator, Mining Beacon

Previously editorial director of Mining Journal, and more recently head of S&P Global Market Intelligence's metals and mining team, Chris is now Mining Beacon's editor-in-chief and lead commentator. He posts two blogs every week, one on Monday reviewing market conditions over the prior week, and a second on Thursday looking at issues on the global mining scene. There is also a quarterly blog on business opportunities in the sector.