ESG Will Take Center Stage in Post-COVID-19 World

The coronavirus pandemic has accelerated existing trends in the mining industry, with experts suggesting that environmental, social and corporate governance (ESG) initiatives will take on a more prominent role in a post-COVID-19 world.

For Tom Butler, CEO of the International Council on Mining and Metals, the companies that have over the years consistently invested in ESG, especially the social aspects, are the ones that have been able to react most quickly and adapt to the rapidly changing circumstances of the last few months.

“While this can be challenging to get right, I believe those companies that invest in building and maintaining community relationships will be those that come out of this crisis, and in any future crisis will be in a better position than those that do not,” he said at a Mines and Money webinar last week.

In the post-pandemic world, mining will continue to be under the spotlight because it will be an essential part of the economic recovery process, and will be key to building supply chains around the world.

Speaking from a fund manager’s perspective, Ian Maxwell of Pacific Road Capital said having companies with robust, systematic ways of managing material risks is extremely important.

“When we invest in companies, what we look at is real differentiation between those companies that have well-prepared, robust operating models, good connectivity with the community, (and) those that are really scrambling around to try and get the basic data and information to deal with response.”

Ani Markova, who is currently on the board of SilverCrest Metals (TSX:SIL,NYSEAMERICAN:SILV) and Golden Star Resources (TSX:GSC,NYSEAMERICAN:GSS), said COVID-19 has really brought a true stress test to all business resiliency.

“I think that the mining industry has responded quite well,” she said. “Just because we have had this structure of focusing on health and safety that has been such an integral part of all of our DNA, and being able to analyze and understand how important having social license to operate is.”

For Markova, this current season needs to be a reset moment of trying to rethink how companies do business, if there are ways to improve the way they do business and then to look for those opportunities.

“I think that from a mining industry perspective, perhaps most true for junior companies, we do so much more, we just are not quite good at describing what exactly we’re doing and linking it to how it is helping with our ability to do business long term,” she said.

Markova added that it is difficult to quantify, in particular because the S (social) component of ESG is hard to put a number on a lot of the time.

“We just have to tell it right with the right disclosures, and it will take us combined efforts to determine what are the most important factors,” she said. “COVID-19 has brought a concept of dynamic materiality — we want to know what are the most material factors that we need to monitor and report.”

Markova advocated for a scorecard that everybody can monitor, from people on mining sites all the way to boards and then external communications.

Speaking about the ESG trends he sees ahead, John Howchin of Swedish Pension Funds said there’s an increasing focus on individual mining sites and not aggregated ESG data from companies.

“I think many of the issues that we see within mining, if you think about indigenous rights, local social issues, water issues, they’re all connected to the individual site,” he said.

When Jon Samuel of Anglo American (LSE:AAL) was asked if he thinks his company is on top of ESG, he said there are always things to be learned.

“Our priority going forward is firstly human. We’re still, still very much in the thick of (the pandemic) in most of our operating countries, so our big focus is on trying to remind people about the precautions we should be taking, and actually delivering what we’ve promised and committed to support communities.”

For Markova, one thing the industry should focus on in terms of ESG as the world moves forward is what companies can control, which for her is the quality of their own disclosures.

“Let us as an industry come up with the standard that we will disclose — we’ll put on our websites and it will be easy for investors to get engaged,” she said.

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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.