CSR used to be the way we call it, and it seems that sustainable practices have been broaden through ESG and especially during the pandemic.
Andrew Lane, Senior Partner at Deloitte Africa, Mark Cutifani, Chief Executive of Anglo American Group, Mxolisi Mgojo, CEO of Exxaro Resources, Bold Bataar, CEO Energy and Minerals at Rio Tinto, Lord Charles Vivian, Director at Tavistock and Nigel Beck, Head of Sustainable Finance at Standard Bank ran a lively discussion around this topical subject during the first day of Mining Indaba Virtual.
Tavistock highlighted that there are more “generalist” investors willing to do the right thing – the new generation of investors, are millennials and believe that mining will be part of the future but feel that investment decisions should be done responsibly and in accordance with ESG principles.
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As a mining company, you have to be seen doing the right thing when it comes to running your operations, this will help the share price and the reputation of your business.
Lane, looking at the tracking trends 2021 reinforced the fact that out of 10, three of them are completely aligned with ESG. Mining companies are spending more and more budget on ESG reports looking at closing what he calls “the trust deficit” and shifting the delivery of their operating models.
“You can talk the talk but you got to walk the walk”
From an investor’s perspective, Beck insisted on the fact that financial performance was not the decisive factor anymore as we can see considerable growth and interest throughout different sectors, such as sustainable financing products on the top of the podium. ESG has now taken the front seat and the fact that such a topic is being addressed on day one of Indaba shows the importance that is being attached to it.
Looking at the impact of COVID-19 on investment decision making and integration of ESG, there are two schools of thoughts; on one side, some believe that it will accelerate the demand for ESG and sustainable finance.
Other will prefer to see it on the backburner as mining companies will need to focus on their operations delivery. However, we have seen quite a strong growth into social bonds since 2019, with a rate exceeding 700%.
Keeping the “S “in mind
Mgojo reminded us that in the South Africa, coal is still a very important in the economy to create or sustain jobs – pivoting fully into renewables would create a huge social catastrophe for communities.
However, he confirmed that Exxaro will not be investing more in thermal coal but will have to carefully manage the existing plants; it is about transferring the assets in responsible hands to make sure mining companies remain positive players in a greener transition.
Cutifani and his team are in the process of demerging their coal plants as it is a relatively small part of their business (less than 5%). They will be focusing on iron ore, PGMs, battery metals, which make their portfolio fit for the future.
Beck made a distinction that the importance given to the S or the E is mostly based on geography; in developed economies, investors look much more at the green element whereas emerging markets put more attention to the social element. Cutifani made clear that in fine, it’s about bringing the stakeholders in the conversation, and change the perception of the business.
Are we getting it right?
Government regulation and legislation has not necessarily caught up with the ESG shift reminded Bold, and what is legal is no longer enough or acceptable.
Each organization has to define what their purpose is all about. Are we thinking about the future and sustainability of our communities when resources go to an end? Do we talk about closure? Or do we define capital allocation and how to drive your strategy in the future?