Within the mining and minerals sector, investors are increasingly integrating environmental, social and governance (ESG) into their investment process to help secure capital during fundraising, identify risks during due diligence, capitalise on opportunities post-acquisition, and facilitate information disclosure in exit.
However, International Council on Mining and Minerals (ICMM) COO Aidan Davy believes increased opacity is needed.
“Investors rarely disclose specific details about their internal processes for integrating ESG factors into investment decision-making, and the relative weight assigned to ESG factors is completely opaque,” he says.
Davy believes that while the growth in responsible investment implies dramatic progress over the past decade, much greater line of sight on how ESG issues are integrated into investment decision-making is required if this is to become a driver of responsible behaviour on the part of companies.
“I also believe the investment community needs to pay more attention to the quality of management of ESG issues rather than data disclosures that are often of dubious value, and move beyond a narrow focus on risks with a direct and tangible connection to enterprise value.
“Lastly, they also need to find a way to give credit for social value-creation,” he adds.
The Investing in African Mining Indaba 2020, which will be held in Cape Town, next week, will host insights and discussions with industry heavyweights from across the value chain on the subject of ESG.