ESG Now the "Price of Admission" for Miners as Investors Seek Responsible Companies

In today's rapidly evolving investment landscape, the spotlight isn't just on financial returns; it's also on environmental sustainability, social responsibility and governance — better known as ESG.

According to a 2021 report from Accenture Global (NYSE:ACN), 59 percent of investors want miners to aggressively pursue decarbonization and be market leaders in that effort. The report, titled "Global Institutional Investor Study of ESG in Mining," was based on responses from 200 public and private institutional investment firms from around the world.

On a similar note, 63 percent of respondents said they would be willing to divest from or avoid investing in mining companies that fail to meet their decarbonization targets or don't pursue decarbonization aggressively enough.

These numbers are reinforced in a 2023 report from EY on business risks and opportunities in the mining sector.

The annual report, which surveyed 150 mining executives, ranks ESG as the top risk on the radar for businesses.

The importance of ESG was also reiterated at the annual Prospectors & Developers Association of Canada (PDAC) convention, which was held at the Metro Toronto Convention Center in early March.

During a panel called “Mineral Financing and the Banking Ecosystem,” mining experts from Canada’s top banks weighed in on the value of ESG for investors and the challenge of attracting capital to the sector in the current market.

“I think now (ESG) is kind of the price of admission,” said Andrew Thompson, director of global mining equity sales at RBC Capital Markets. He said investors are approaching the sector with the expectation that a company’s ESG work is strong.

Due to this expectation, he believes ESG is less top of mind than it was a few years ago.

“Now it's part of the overall investment thesis as opposed to determining the investment thesis,” he said.

The idea of good ESG metrics being the price of admission was reinforced by Jackie Przybylowski, managing director at BMO Capital Markets, who noted at PDAC that “(ESG) doesn’t feel as performative as it has.”

She explained to listeners that in the past it felt like companies were only adding ESG slides into their presentations to lure investors, and now it feels more genuine and holistic.

With audio files from Lauren Kelly.

To see the rest of INN's PDAC content, click here.

Don't forget to follow us @INN_Resource for real-time updates!

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