Impact investing principles could solve ESG challenge – Wallington

25th February 2021 By: Schalk Burger - Creamer Media Senior Contributing Editor

Impact investing principles could solve ESG challenge – Wallington

Impact Capital Africa founder and CEO Brett Wallington

The mining sector is well positioned to apply impact investment principles to achieve environmental, social and governance (ESG) targets and shareholders increasingly expect large JSE-listed mining companies to move beyond compliance and demonstrate their sustainable ESG impacts throughout their value chains, says ESG advisory firm Impact Capital Africa founder and CEO Brett Wallington.

Impact investments are aimed at generating positive, measurable social and environmental impact alongside a financial return. If the mining sector were to apply such thinking, it could significantly innovate and successfully contribute to sustainable development and reignite stagnant mining capital, he adds.

"There is a growing understanding of the link between sustainability and financial performance, which is coupled with growing evidence that higher ESG performing companies are generating higher returns," he explains.

"For example, if post-mining and offset land was looked at with a different lens, perhaps this is where mining companies can innovate and turn significant liabilities into opportunities. Capital can be reinvested into sustainable agriculture, renewable energy or conservation biodiversity to name a few – all the while turning cash-draining liabilities into alternative revenue streams that are rich in natural and social capital."

Some mining companies are already seeking alternatives to adapt their existing ESG models to look beyond compliance, especially related to post-mining land use. This can be a successful mitigating strategy when a mine is reaching closure as it establishes alternatives for employees in the affected communities, thus safeguarding jobs and preventing social unrest, Wallington states.

This means potentially solving the environmental and social compliance challenges with a socioeconomic and natural capital intervention that comes complete with financial returns; thus, taking a positive step towards solving a large portion of the ESG challenges mines face, he highlights.

"Looking at the post-mining land available, investments into agricultural commodities makes good business sense. It is, therefore, no surprise that some CEOs see agri-economies as a key impact investment opportunity that can sustain employment after the decommissioning of mining assets. This, in turn, could improve food security and contribute to poverty alleviation while, as the 'UK 2021 Economics of Biodiversity Dasgupta' report recently found, also contributing to natural capital preservation, which has the potential for quicker and more sustainable returns."

The challenge is to tackle the unknown of impact investing risk and diversify potential earnings, all of which requires a strong socioeconomic and environmental strategy and measurement framework to illustrate such positive impacts and ensure sustainable revenue growth.

"This means reviewing the current ESG strategies and policies. Impact Capital Africa and its advisory team created the +Impact SDG [United Nations Sustainable Development Goals] Investment Grading Tool.

"Impact Capital Africa seeks to partner with mining clients and help to develop a robust strategy for mining companies towards sustainable impact investments on rehabilitated, post-mining or offset land. This includes the quantification of impacts in alignment with ESG and impact investing frameworks that sit alongside the financial returns of the investments," Wallington notes.

Further, this enables a clear, independent and robust narrative to disclose with shareholders and stakeholders alike through listed reporting requirements such as annual audits, integrated reports, ESG reports and risk and governance reports.

"The mining sector could think differently about ESG and explore innovative investment opportunities on their own land that can contribute to the bottom line with sound ESG due diligence and impact-investment-aligned positive impacts," he says.