Expert Insight

Cape Town shows ESG is no buzz term

Virtually every keynote, panel at the annual Mining Indaba pondered the issue

April 21, 2020

Kristie Batten

Expert Insight
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February 21, 2020
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This year’s mining events in Cape Town showed that environmental, social and governance issues are front of mind for both companies and investors.

There was a lot of discussion on climate change and ESG, with virtually every corporate presentation and panel touching on it.

"It's great to see the climate debate elevated," Rio Tinto group corporate relations executive Simone Niven said during a panel discussion on the main stage of Mining Indaba.

"The fundamental challenge for the investment community and us is, how do you measure ESG?"

Niven called for a standardisation or "mainstreaming of metrics".

Barrick Gold CEO Mark Bristow made it clear ESG was a "newish metric", but not a new concept.

Even capitalism's most unvarnished practitioners have discovered a social conscience," he said.

"I say to those, welcome to the club.

"I've been arguing for a while a good business also has to be a good corporate citizen."

Bristow noted that while ESG was a "very big challenge" for the industry, the focus in Africa should be tackling poverty.

"Poor people don't give a damn about the environment," he said.

Anglo American CEO Mark Cutifani said the industry was not oblivious to the criticism directed at it.

"If we are going to continue to play an instrumental role in powering human progress into the future, we need to ask ourselves some tough, but necessary questions about our values as an industry," he said.

"Simply put, we need to connect the future of mining with emerging and next-generation societal values. These are the values of increased transparency, responsible technological innovation, sustainability and shared prosperity, all of which are emergent in our world and are shaping a very different future society."

Anglo group head of international and government relations Froydis Cameron said Cutifani dealt with ESG issues daily over the past year.

"Every single meeting he gets, ESG is front and centre," she said.

It's a continual activity that companies have to learn, and learn to do properly

Cameron said too many companies were "talking the talk", but not "walking the walk" on ESG.

"We're only as bad as our worst performer," she said.

Never before have ESG issues been so strongly aligned with investment.

A recently released Bank of America report found companies with top ESG rankings outperformed in the S&P 500.

World Gold Council chief market strategist and head of research John Reade said ESG was in the top two questions in late January investor briefings in London and New York.

"That just would not have happened two or three years ago," he said.

"If you can't discuss your ESG credentials, you won't get meetings."

Orion Resource Partners portfolio manager Mike Barton said ESG was always the first question now, but in Europe, things had perhaps gone a little too far.

At 121 Mining Investment Cape Town, Oslo-based Clarksons Platou head of metals and mining Hans-Arne L'Orange admitted there were good returns in metallurgical coal, but it was unlikely he'd buy met coal stocks.

"The investment universe [for met coal stocks] is decreasing and decreasing," he said as part of a panel discussion.

"Equity investors are driven by ESG and that wave is going to get larger and larger."

Back at Indaba, Cameron was angered by the increasing groundswell of support towards exiting coal investments, which she said was misguided.

"To say we need to get rid of it without any sort of responsible transition is irresponsible in itself," she said.

A transition to renewable energy wasn't always what it seemed either, she added.

"If you make the hydrogen by using coal-fired energy, that's not going to work either."

Cameron said communities around the world depended on coal.

"It's very easy to sit in northern Europe and throw stones," she said.

BMO Capital Markets analyst Colin Hamilton said the anti-coal push seen at other conferences seemed to be pared back at Indaba, though sustainability was the buzz word of the week.

"There were so many sustainability panels at Indaba that often they were to be found overlapping on different stages at the same time," he said.

"Given that the conference is naturally supplier-heavy, there was clear messaging from the major companies that the sustainability measures they were being asked to meet from downstream customers would be getting pushed back on suppliers hard and fast."

Even an Indaba panel discussing ways to attract millennial investors (which oddly lacked a member of that generation) came back to ESG, which is valid considering the BofA report also found millennials were the fastest-growing demographic of investors in ESG funds.

Investec Asset Management portfolio manager George Cheveley said attracting sceptical younger investors was a major challenge that would require a step up in public relations from miners.

"It's a continual activity that companies have to learn, and learn to do properly," he said.

"The fact is, you're going to lose investment if you don't do it."

Expert Insight
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April 21, 2020

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