There are growing demands for accountability in the mining industry and ESG is playing a massive role for both miners and investors. Looking at why ESG is gaining such traction the resounding impacts it’s having on the industry, Ian Maxwell, Operating Partner at Pacific Road Capital notes a general increasing trend in ESG in an industry that has historically had some problems in this field. The current discourse on energy transition and investment in metals of the future is helping to bring in more investors who are ESG-focused and is in general bringing more attention to this growing field. Jacqui Murray, Partner and Investment Team Leader at Resource Capital Funds adds that the growing media coverage and the attitude we’re seeing from the banks involved in financings is helping to bring momentum to the conversation. Gabriel Wilson-Otto, Head of Stewardship for Asia Pacific at BNP Paribas Asset Management describes how we’re moving in a phase where we have this virtuous feedback loop, with more interest from investors putting pressure on the government and then shifts in government policies which feeds back into ideas around what constitutes a profitable investment. This inevitably leads to more economic support for these funds which translates into stronger performance by the underlying commodities, further spurring on more investor interest.
Maxwell notes that the greater scrutiny has led to greater internal feedback from within the industry itself and where people are more focused on doing the right thing. Murray adds that the economics of sustainability (such as using renewables on-site) are further helping to drive this focus on ESG.
When discussing the impacts on investor decision-making, Murray notes a general shift beyond standard License to Operate type of standards that the industry has traditionally focused on. At RCF, in assisting companies towards greater compliance against industry standards, a major area to focus on is around governance as well as assisting juniors in prioritizing what they need to do first given their limited resources. Maxwell adds that their interviews with senior leadership is of key importance because ultimately ESG starts from senior leadership as a cultural push from the top.
Wilson-Otto outlines 4 key pillars of focus for BNP Paribas Asset Management – that being ESG integration (due diligence, best practice, firm culture); Stewardship (driving positive change); Adherence to minimum standards (red flag standards to look out for); and an overall Thematic Alignment, looking at the broader tailwinds driving change in energy transition, environmental sustainability, and equality and inclusive growth.
The cultural push from the top seems to be where investors are most focused with regards to a company’s ESG. Wilson-Otto focuses on companies that are thinking about ESG from a strategic standpoint, making it a core component of their business. From the juniors, the engagement of top level management with the issues is key and the presence of a genuine internal debate around trying to figure out what moves the dial for their business. Murray agrees that the governance side of the ESG is coming from and center to them and their focus is really on how the company addresses the key ESG issues from the top. Finally, Maxwell notes the importance of communication – companies need to demonstrate how they’re measuring their progress, where they’re focusing, and more, so that investors can see how the company culture aligns best with their ESG-focused investment decisions.
Panellists:
• Gabriel Wilson Otto, Head of Stewardship, Asia Pacific, BNP Paribas Asset Management
• Ian Maxwell, Operating Partner, Pacific Road Capital
• Jacqueline Murray, Partner, Investment, Team Leader, Resource Capital Funds
