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Bristow, BlackRock’s Hambro call for uniform ESG reporting

9th March 2021

By: Marleny Arnoldi

Deputy Editor Online

     

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Investment company BlackRock foresees many changes in the resources market going forward, as companies evolve their product mix based on the carbon intensity of production, as well as pricing differentials based on the “greenness” of commodity production.

The company, along with global miner Barrick Gold Corporation, shared its views on the changing investment landscape for mining, particularly considering environmental, social and governance (ESG) factors, during the Prospectors & Developers Association of Canada Convention on March 8.

“We will see new sources of raw materials being exploited such as urban mining and recycling. We will see increasingly more circular business models, with companies trying to keep resources in circulation, be it commodities itself or input sources such as energy or capital.

“Society around the world is reaching a level where it is replacing products that have built-in-obsolescence. The way consumers are adjusting their consumption patterns will no doubt impact on the resources industry within this decade,” said BlackRock MD Evy Hambro.

He added that this was already playing out, considering that carbon pricing had doubled over the last few months and the mining industry was evolving its operational manner, supply chains and disclosures in such a way as to satisfy not only stakeholders and investors, but also the end-customer.

Barrick president and CEO Mark Bristow commented that ESG and responsible investing had been around for a long time, but he was seeing “a different way of harvesting the market now”.

“Companies want to stand out in this environment and make a statement. Most public businesses are fully committed to ESG, but the manner of delivery differs and businesses have to put more effort into communicating what they are doing.”

Bristow added that the issue of poverty, as part of the ESG’s social element, had come to the fore as a focal point. He said there was a realisation that investment to this end was necessary if companies or, major economies, want to make an impact.

Looking at the environmental element, he pointed out that most major mining companies have been good environmental stewards, since there is regulation involved and standards bound to the industry.

He believes that the mining industry can be considered ahead of many other industries in that regard, but “the social licence to operate has become absolutely critical”.

While the social element of ESG typically involves stakeholder engagement for mining, it also involves the impact on people and community upliftment, beyond employment numbers.

While many a mainstream investor was aware of these types of activities that mining companies undertake, thanks to their teams of specialist advisers, there was still a lot of convincing to do and awareness to create to reach a wider audience of investors and stakeholder support, Bristow noted.

While individual companies could get ESG-related validations from the International Council of Mining and Metals, or the World Gold Council, for example, Bristow argued that the industry needed a standardised format for ESG reporting that still considers different interests and positioning.

“Mining is essential, everyone uses its products every day, and yet it remains an unloved industry. We have to change that. We need to bring diversity to our businesses and young people who are eager to make a positive contribution.

“Responsible mining also requires technology. In managing ESG, you have to invest in technology and clean ones at that. Again, here we need young people to think outside the box,” Bristow said.

Hambro stated that ESG and its impact on cost of capital was playing out at a rapid speed.

“The amount of money going in that direction is not necessarily a function of liquidity, but a fundamental shift in capital markets. People are investing from a different perspective and orientating capital to qualifying companies and securities through an ESG lens,” he explained.

Hambro added that complying companies were benefitting from demand for their securities and, as that demand continues to rise, the cost of capital declines. This while noncompliant companies will see higher cost of capital.

He agreed with Bristow on the need for uniform ESG reporting. He used the example of mining safety metrics that have become standardised, which also took a long time, but as a result investors have a better view of how the industry globally is performing, as well as at company-level.

Moreover, Hambro said that, with the rise of companies trading at a discount owing to noncompliance to ESG elements, it creates opportunities for active investors to buy a company with quality assets and fundamental bases, but lack positive perceptions attached to ESG, which can have capital deployed into.  

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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