In recent years we all have noticed the three letters ESG (Environmental, Social and Governance) have increased its presence in all our lives. From big supermarket brands to the metals and mining industry. In this industry, we have seen fundamental changes in the last couple of decades. Some of these changes have been technological and these have contributed to making technical risks more manageable. This situation has shifted some of the focus to other risk factors that were perhaps getting less attention in the past.
But why is ESG an important factor in the mining and metals industry? Part of the answer to this question relies on the increase of compliance with mandatory and/or voluntary reporting and legal obligations relating to ESG procedures and standards. However, on the other hand, we have also seen an increase in the expectations that the investors and lenders have when making their investment decisions.
In the representation of the mining investors, we have invited Jamie Strauss, CEO, and Founder of Digbee; a platform for the mining industry that provides on-demand data, research, and ESG disclosure. Jamie has raised over $1bn to finance mine development over the last 20 years. He has built and led three mining finance teams at boutique and global banks, as well as a seasoned independent director of listed mining companies.
1 | Why is ESG an important factor in the mining and metals industry?
Mining is critical to the world’s transition to a sustainable future, yet the sector carries a huge weight of responsibility when it comes to virtually all topics within the realms of ESG. While much can be improved, notes should be made to the considerable improvements covering Health and Safety, stakeholder engagement and improved working practices over the past 20 years. The momentum of the ESG movement and its increasing importance in the allocation of capital will have wide implications on the sector. Simply stated is that if the sector fails to come together and flow with the tide, then it will get left behind on the beach. Capital will be more difficult to attract, technology improvements to mitigate environmental impact will be constrained, young people will not be attracted to the industry, and the knock-on effect will have negative implications on stakeholders that rely on mining development. Yet, if the industry embraces the movement, the opportunities are vast and probably outweigh those many other industries. If there is a means to credibly track companies ESG metrics and prove in a transparent process the positive actions being taken to apply best practice, reduce emissions, protect biodiversity, and improve social engagement, then new pools of capital can be accessed, management competition to improve ESG metrics will encourage further improvement and ultimately the sector will win the hearts and minds of society, likely benefitting through higher market valuations.
2 | From somebody that has raised over $1Bn to finance mine development over the last 20 years, have you noticed a shift in recent years on the investment side of things when it comes to ESG?
Mining companies have been practicing ESG in some form or other for decades; we called it social license. Strangely, there has been a polarity between debt and equity markets for some time, the debt providers largely requiring compliance with standards, such as the Equator Principles (developed by The World Bank), since 2003. But it was very rare, but with some exceptions, that equity fund managers would require a company to comply with any formal obligations.
As you would expect, the movement of ESG disclosure/reporting intensified its focus on the major producing companies initially, but the speed with which smaller companies are brought into the net has been rapid. It is now virtually impossible to raise funds from bonafide institutions for development of projects without the need to prove an ESG reporting strategy. And it is now conceivable that within the foreseeable future, all listed (and most likely private) companies will be required to report on its ESG credentials before any institution will invest or lend.
“within the foreseeable future, all listed (and most likely private) companies will be required to report on its ESG credentials before any institution will invest or lend.”
3 | There have been some efforts made towards due diligence by some of the large mining corporations but perhaps things are different for some of the juniors. How do you compare the approach to ESG in the mining and metals industry to other industries? And is it different between large market cap companies and smaller junior mining companies?
The mining industry is unique in that it is highly complex and capital intensive, it is often situated in areas of the world that have extreme poverty and the environmental impact compared to many industries is very high.
While it is probably fair to say the junior mining industry is behind the curve in respecting the speed at which ESG disclosure is increasingly required, I have noticed an overwhelming effort to embrace ESG disclosure over the last six months right across the spectrum, with a wish to publicly demonstrate the actions management are now taking and with an expectation that they will be rewarded for doing so.
I think many in the industry have learnt from some of the major companies in the sector as to the impact on reputation and credibility if this is not taken seriously, in turn respecting that it is far more than just a matter of having a few policies published on a website.
But what, how and when do we disclose ESG?
4 | From my understanding, Digbee ESG is an ESG disclosure platform for the mining industry. It offers a future-looking, right-sized set of frameworks, aligned to the key global standards. How can Digbee ESG contribute to supporting mining investors and mining companies?
Mining company managements, encouraged by society and capital providers to adopt ESG, are left confused with what, how and when to disclose. Digbee’s (thedigbee.com/esg) right-sized frameworks are aligned to the global standards and allow all companies to create a blueprint for their ESG disclosure which can then be submitted for an independent assessment and thus gaining a credible public score which can be freely accessed in as much granularity as is required by local stakeholders, capital providers, insurers and others. This allows for management to be rewarded for their actions, for ongoing improvement to be encouraged throughout the different ESG topics, for investors to compare companies/projects and for the industry to improve its perception and ultimately attract new investors to the sector.
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