Mining explorers and developers are adopting ESG standards at a faster pace in 2022

A PwC study last year showed that mining companies with higher ESG ratings have an average total shareholder return 10% higher than the overall market index.

According to ESG Capital Managing Director Steve Morgan, mineral explorers and developers around the world are expected to adopt environmental, social and governance (ESG) standards at a faster pace in 2022.

“There are still knowledge gaps in this segment of the market in terms of how to go about it, but there are very few well-governed small and mid-cap resource companies that aren’t looking to ESG now,” Morgan said. Explain.

ESG is not just an impact, it is an intention

ESG is often seen as a purely impact-oriented concept.

This is why it is traditionally associated with producers and those in advanced stages of development where the environmental and social impacts are clear and apparent.

Mr Morgan, who is a Global Reporting Initiative (GRI) certified sustainability professional, says what has changed in the ESG space is now viewed through an intent lens.

“Investors and lenders are asking resource companies at all stages, from pre-IPO to advanced explorers, the questions: What are you doing on ESG? What standards will you report to? you actively manage and how can you demonstrate performance on these?”

“And, if you can’t answer those questions as a director or leader, it shows a clear lack of corporate intent.”

Mr Morgan added that companies in their early stages need a “proportionate” approach to ESG compliance and cannot expect to produce detailed data from day one.

“They can communicate their plan and provide guidance on implementing that plan.”

Investor expectations follow the money

As it matures, the link between ESG and mining investment returns becomes clearer.

A 2021 study by PwC showed that mining companies with higher ESG ratings have an average total shareholder return 10% higher than the overall market index.

His numbers like these continue the “trickle down” of ESG attention from the biggest miners to the mid and small caps.

ESG as a window

ESG can be seen as a corporate framework for stakeholder capitalism.

Chairman and CEO of investment advisory firm BlackRock, Larry Fink, recently outlined his definition of stakeholder capitalism in his 2022 annual letter to the CEO: “It’s capitalism, driven by mutually beneficial relationships. between you and employees, customers, suppliers and communities. your business matters to thrive. This is the power of capitalism.

Explorers and aspiring developers with high ambitions know full well that success depends on bringing together a wide range of stakeholders and executing a plan.

Part of this is effectively managing ESG risks and opportunities.

It is this window that a well-structured and clearly communicated ESG strategy and reporting provides investors and lenders, and it has quickly become an integral part of mining transactions.

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