Miners feel investor heat
Mining News Pro - Mining company executives expect pressure from investors on environmental, social and governance aspects of their businesses will only escalate in coming years as issues such as climate change, engagement with traditional owners, and slavery in supply chains garner increasing public attention.
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In the wake of Rio Tinto’s Juukan Gorge cultural heritage scandal, in which the mining giant was widely condemned after destroying a significant Indigenous site in the Pilbara, Australian mining company executives say institutional investors have sharpened their focus on ESG matters, accelerating a trend that has been building globally for the past several years.

Institutional investors, especially superannuation funds, have been the drivers of mounting ESG pressure locally and were instrumental in demanding greater accountability from Rio after the Juukan blast.

Presentations at the Diggers & Dealers Mining Forum in Kalgoorlie-Boulder this week had noticeably more prominent sustainability and social responsibility slides, with goldminer Regis Resources, for example, declaring to the more than 1900 delegates it was “increasing our standard of reporting” in response to shifting investor expectations.

Fortescue Metals Group chief executive Elizabeth Gaines said the iron ore miner had had “a lot” of investor inquiries about heritage management in recent months, including taking several one hour-plus calls with individual investors on the subject.

“We have had some calls that are dedicated just to this issue,” Ms Gaines said.

“I think it is fair to say that a number of both domestic and offshore funds are really focused on this area and it is not an area that they are that familiar with, so it’s a bit of an education process.

“We have had a number of calls that might be an hour or hour-and-a-half in length where we take them through it.”

Northern Star Resources chief executive Stuart Tonkin said he had noticed questioning on non-financial topics increase in the four years since he took the helm of the goldminer, driven by global leaders such as Larry Fink, the chairman and chief executive of the world’s largest fund manager BlackRock.

In his 2020 letter to chief executives of the world’s largest companies, Mr Fink warned “companies, investors, and governments must prepare for a significant reallocation of capital” in response to climate change.

In an accompanying letter to BlackRock clients, the firm pledged to start considering “ESG risk with the same rigour that it analyses traditional measures such as credit and liquidity risk”.

According to CFA Institute, a global association of investment professionals, ESG investing represents a growing portion of overall capital market investments.

In a May 2020 report, CFA estimated there were “tens of trillions of US dollars in assets under management”.

For example, the Global Sustainable Investment Alliance reported that more than US$30 trillion was managed according to responsible investment criteria in 2018.

A Deloitte report launched on Monday at the conference highlighted the potential economic benefits of “de-carbonising” WA’s significant mining industry and warned the risks being felt by the mid-market would only increase over the short term.

“Companies standing still will suffer. Now is the time to take action,” the report stated.

“Banks are already charging more for debt provided to companies that have the potential to go against their own shareholder demands.

“Many equity investors can no longer touch high emissions stocks, leaving companies with less demand for their stock.

“Conversely, companies taking action to set a strategy for the next 10 years are being rewarded with concessional loans and increasing valuations. As the transition to a low-carbon future accelerates, financiers are moving away from 20th-century business models, technologies and infrastructure, towards increased investment in clean energy, transport and smart infrastructure — and the commodities that will underpin them.”

Ken Brinsden, the boss of hard rock lithium miner Pilbara Minerals, pointed to the potential for the miner to ultimately participate in producing value-added products such as lithium hydroxide in response to research recently published by Roskill on the energy-intensive nature of hard-rock lithium mining and the carbon footprint of shipping the concentrate to China for refining.

Likening the maturity of the lithium industry to the Pilbara iron ore industry in the early 1970s, Mr Brinsden said the lithium space would likely change dramatically on the back of innovation in coming years.

“You ask yourself, ‘OK, how much innovation can be deployed to smooth out the supply chain and reduce the carbon footprint?’,” he said.

“I would say the answer is heaps, and hopefully the smartest people in the room are working on that now and we will find those solutions.”


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