Survey places ESG at top of miners' minds

18th February 2022 By: Esmarie Iannucci - Creamer Media Senior Deputy Editor: Australasia

PERTH ( – A survey by law global firm White & Case has identified environmental, social and governance (ESG), resource nationalisation and climate change regulation and shareholder activism as top concerns for 2022.

“The mining industry has found itself caught between two competing themes when it comes to ESG. On one side comes the continued pressure from mining fossil fuels and the recent disasters that have done considerable damage to the entire industry's reputation, such as the fatal dam collapse in Brazil and the destruction of ancient aboriginal heritage sites in Australia.

“More positively, however, is how the industry has become increasingly adept at making the argument that it is becoming a far cleaner, and more sustainable sector, and with this improved ESG performance, it can be a reliable and trusted partner to mine the materials that will enable the green transition. This shift opens up opportunities for the industry going forward, provided individual players can demonstrate their ESG credentials in all respects,” White & Case said in its sixth annual 'Mining and Metals' report, released earlier this month.

For the second year in a row, respondents to the survey stated that ESG issues remained a considerable risk to the sector in 2022, with 24% viewing it as the biggest threat, rising to approximately 40% when climate-related activism and regulation were included.

“While not necessarily a surprise, an increasingly sophisticated conversation is happening and companies are recognising that opportunity exists for those companies effectively managing this risk. Other risks are also elevated compared to 2021, with resource nationalism doubling to 16%, followed by supply chain disruption and a Chinese slowdown,” the report stated.

White & Case noted that despite many challenges still facing the mining sector, from inflationary pressure, resource nationalism and continued trade disruptions, it was clear that boards were focusing on the opportunity presented by the global energy transition.

“This view is reinforced by our survey, which shows that responding to the challenges of climate change and the energy transition should be the number-one priority for the industry this year, at more than double last year's 12% tally. Yet another takeaway is the relatively even spread of responses, with supply chains, growth and productivity all relatively prominent.

“After the challenges wrought by the pandemic, perhaps the industry is finally able to return to more traditional issues this year.”

Meanwhile, the report noted that energy transition materials would be a significant focus for miners in 2022, with 20% of those companies surveyed saying that exposure to those commodities would be the best way to draw investors.

It noted that diversified miners accelerated their transition in 2021, with major BHP announcing it was exiting oil and gas and that it continued to move away from thermal coal, while Anglo American exited thermal coal altogether.

Vale also announced its exit from the coal market as part of its commitment to become carbon-neutral by 2050 and reduce one-third of its emissions by 2030.

“In its place, the biggest miners have been pushing aggressively into future-facing materials. Rio Tinto sanctioned a $2.4-billion lithium project in Serbia, which now faces significant local challenges, linking into our respondents' growing concerns about resource nationalism in the sector, in addition to announcing the purchase of the Rincon brine project in Argentina. BHP sanctioned a giant new potash project, and has been actively looking to buy new copper and nickel assets, most recently investing in Tanzania's Kabanga nickel project early in 2022.”

White & Case has also predicted consolidation within the battery minerals sector, with mining majors likely to take stakes in junior miners sitting on forward-facing commodities such as copper, nickel and lithium.

“There was a small window at the start of the pandemic, when equity values plummeted, but now with many of the miners trading near record highs, transformational merger and acquisitions looks to be an unlikely prospect. According to our survey, that means opportunistic deals remain the most likely, especially as portfolios continue to shift toward more ESG-friendly commodities. Some 42% of respondents expect consolidation in the battery minerals space this year, up from only 13% a year ago,” the report read.