Earlier this month, Buchanan and Emperor hosted a panel on the sidelines of Mining Indaba on the topic that is on everyone’s mind – ESG (environment, social & governance) and its impact on the mining industry. As of this year, it is estimated that US$40 trillion worth of financial assets are being run with an ESG mandate, which begs the questions: Where and how does mining fit in? Will the sector become irrelevant and lose access to this large and growing source of capital? How are mining companies responding? Is there a cost for those companies that do not have an ESG strategy? For those companies that do adhere to an ESG framework, how are they communicating it to their allies and naysayers? And, ultimately, what does the future look like for mining in a lower-carbon and increasingly sustainability-conscious world?
Our speakers, Samaila Zubairu (President & CEO at Africa Finance Corporation); Stéphanie Clement de Givry (Global Head of Metals & Mining Finance at Société Générale); Tom Attenborough (Head of International Primary Markets at the London Stock Exchange); Alison Baker (Non-Executive Director at Kaz Minerals & Helios Towers); Nerine Botes (Executive Sustainable Development at African Rainbow Minerals); and Unathi Loos (Portfolio Manager at Investec Asset Management), guided by our moderator Neil Hume (Natural Resources Editor at the Financial Times), tackled these issues head-on.
Disclosure and performance
From an ESG standpoint, as with any sector, the mining industry has had challenges and legacy issues which, in certain instances, is still overcoming. But equally, the industry has a lot to be proud of. Yet the industry still has a hard time communicating it.
This is to the detriment to miners as, increasingly, investors need a company to clearly identify its material ESG issues and present a more complete picture about how the company is managing them to support a sustainable business model and long-term growth. If you are not telling your story then the default assumption will be that you are not doing it at all – and they will simply move on to the next investment opportunity.
Beyond any one company, there needs to be better industry alignment for performance analysis of ESG data, which may come through the adoption of industry reporting frameworks, such as those of the ICMM (International Council of Mining and Metals).
To that point, standardisation is needed. This allows for adequate disclosure on climate change, which affects mines in very tangible ways (e.g. damage to facilities and ancillary infrastructure from severe weather events, increased insurance premiums, etc), and other challenges. Moreover, lack of a consistent framework means not every investor will have its questions answered and will walk away.
In the past, industries have been quite happy for there to be ambiguity in the metrics used and performance management. It meant that comparison was difficult and true analysis could only be completed by those with PhDs in environmental and safety management. The shift in focus and the demands of the mainstream investor seeking more clarity on ESG performance means the question regarding standardisation is now “Not if, but when?”
Ultimately, investors can succeed without investing in mining companies but mining companies cannot succeed without investors. Nor does the industry have the luxury to exclude itself from generalist funds and only accept capital from the specialists. As such, miners that want more investment must look at what their ideal investors’ needs are and cater to them by reframing their investment proposition in a way that resonates. Gone are the days of a ‘one size fits all’ IR strategy but, while this certainly takes a lot more effort, in the end a tailored approach to communications pays dividends.
Yet, ESG reporting, if done from a place of compliance and necessity, will only get you so far. It’s the companies that have embedded this into their DNA and believe responsible mining is core to a sustainable business that will truly succeed.
How do you do this? By speaking to management and stakeholders with the objective of understanding what matters to them and ensuring that there is no disconnect from the Board through to the asset operations.
It goes without saying that ESG and the communications around requires significant investment. But it’s important that you realise you don’t have to do this on your own. We are all in the same boat and collaboration will always be key to the industry’s success. That means that your employees, suppliers, customers, communities, and other stakeholders are all on your side and their feedback should be taken to heart, received without cynicism, and incorporated appropriately. Irrespective of size and position within the development cycle, companies must engage with these groups to improve the likelihood of success of their project – it’s that simple. The alternative is not engaging but that leads to one result – losing the necessary social licence, reputation and funding.
Getting the right access
But back to the investors, which are the focus of miners’ concerns today and who can make or break the industry, and are key if we want to achieve the low-carbon and sustainable future…how do we get them to come back to mining?
It’s by understanding what their criteria are, analysing your current ESG disclosure vs your peer group, having insight on regulatory and best practice disclosure guidelines and incorporating them into your investment proposition, website, annual report and other investor materials.
Are you committed to ESG reporting but not sure how to get started? Email [email protected] to see how we can help you.