{"id":1180802,"date":"2020-04-27T18:30:39","date_gmt":"2020-04-27T23:30:39","guid":{"rendered":"https:\/\/www.mining.com\/?p=1021929"},"modified":"2020-04-27T18:30:39","modified_gmt":"2020-04-27T23:30:39","slug":"investors-increase-scrutiny-%e2%80%a8over-esg-reporting","status":"publish","type":"post","link":"https:\/\/juniorminingnews.com\/?p=1180802","title":{"rendered":"Investors increase scrutiny \u2028over ESG reporting"},"content":{"rendered":"<p>Among the many challenges facing the minerals exploration and mining industry, Environmental, Social and Governance (ESG) issues are receiving increased attention, with ESG programs now critical components of a company\u2019s strategy and business planning.<\/p>\n<div class='d-flex justify-content-center d-xs-block d-sm-block d-md-none'>\n<div id='div-gpt-ad-1561499308230-0'><script>googletag.cmd.push(function() {googletag.display('div-gpt-ad-1561499308230-0');});<\/script><\/div>\n<\/div>\n<p>The Prospectors and Developers Association of Canada (PDAC) convention in Toronto offered several ESG and sustainability-themed sessions focussed on helping companies understand ESG factors and disclosures and how they differ from Corporate Social Responsibility (CSR) reporting.<\/p>\n<p>\u201cBoth have been around for some time,\u201d Amy Freedman, CEO of Kingsdale Advisors, a strategic governance and communications advisory firm, told\u00a0<em>The Northern Miner<\/em>\u00a0in an interview at the conference. \u201cHowever, whereas CSR looks at how companies are taking actions to bring about positive impacts, ESG measures these activities more precisely and reports them as financial metrics.\u201d<\/p>\n<figure class=\"wp-block-pullquote alignright\">\n<blockquote>\n<p> ESG programs now critical components of a company\u2019s strategy and business planning<\/p>\n<\/blockquote>\n<\/figure>\n<p>Freedman was one of four experts on an ESG panel discussion at the conference.<\/p>\n<p>The panel recognized that while there was some overlap between ESG and CSR, ESG focusses on a company\u2019s ability to access capital in both the near- and long-term. The panel noted that a recent survey on responsible investing by RBC Global Asset Management reports that 97% of institutional investors say they evaluate companies\u2019 ESG disclosures. The survey also confirmed that investors are adopting an ESG-based approach primarily because they view it as a way to enhance returns and mitigate risk.<\/p>\n<p>\u201cFirst, companies need to define what their ESG issues are,\u201d Freedman said. \u201cThey then need to show how they are managing the financial risks from these issues and communicate this to investors.\u201d<\/p>\n<p>By nature, mining is complicated, with environmental risks among the highest across all sectors. There are also social risks that can arise from fears of pollution, conflicts over water-usage, and economic and landscape impacts on local communities, the panelists said.<\/p>\n<p>Although there was general agreement among the panelists that they had seen signs of progress on ESG disclosures, they cautioned that many companies were still just making commitments. The panelist also noted that investors and other stakeholders were looking to see progress on these commitments and were becoming more \u201csavvy\u201d in terms of seeing through so-called \u2018ESG-washing\u2019 and that governance risks were driven primarily by a company\u2019s risk culture, size and location of operations.<\/p>\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/www.mining.com\/wp-content\/uploads\/2020\/04\/22828956680_c2571436c0_o-1024x683-1024x683.jpg\" alt=\"\" class=\"wp-image-1021935\" srcset=\"https:\/\/www.mining.com\/wp-content\/uploads\/2020\/04\/22828956680_c2571436c0_o-1024x683.jpg 1024w, https:\/\/www.mining.com\/wp-content\/uploads\/2020\/04\/22828956680_c2571436c0_o-1024x683-300x200.jpg 300w, https:\/\/www.mining.com\/wp-content\/uploads\/2020\/04\/22828956680_c2571436c0_o-1024x683-768x512.jpg 768w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><figcaption>A tailings dam failure at BHP Billiton and Vale\u2019s Samarco operation flooded regions homes in Bento Rodrigues district of Mariana, in the Central Region of Minas Gerais. Credit: Rog\u00e9rio Alves\/TV Senado.<\/figcaption><\/figure>\n<p>In addition, the panel discussed the role of external organizations, like mining industry bodies, which have introduced codes of practices and principles for ESG that help companies in their ESG disclosures. But the panel emphasized the critical role investors play in the dynamic, particularly large institutional investors with long-term investment horizons that are at the vanguard in pressing companies to develop robust and transparent ESG programs.<\/p>\n<p>Freedman acknowledged how challenging it is for companies to qualify many of the ESG issues they face and said she believed that investors need to appreciate ESG risks from the company\u2019s perspective to help them to understand their ESG risks.<\/p>\n<p>Although there are many commonalities among mining companies in terms of measuring and managing their environmental risk, Freedman recognized that social issues are invariably complicated, nebulous, and often location-specific.<\/p>\n<figure class=\"wp-block-pullquote alignright\">\n<blockquote>\n<p>\u201cWhere the issue can be measured, companies should be measuring and reporting them&#8221;<\/p>\n<p><cite>Amy Freedman, CEO, Kingsdale Advisors<\/cite><\/p><\/blockquote>\n<\/figure>\n<p>\u201cWhere the issue can be measured, companies should be measuring and reporting them,\u201d said Freeman. \u201cHowever, social factors are not quantitative per se, so it\u2019s hard, for instance, to give it a score out of ten.\u201d<\/p>\n<p>For these issues, Freedman believes that \u201cthe management and boards of companies will need to develop appropriate metrics, evaluate how they are tracking against them and communicate those evaluations to investors.\u201d<\/p>\n<p>Moreover, mining companies often have operations in developing countries, which can be challenging investment environments, where risks include complex political and socio-economic issues, she said.<\/p>\n<p>For instance, the panel discussed the involuntary resettlement of communities, which often accompany mining projects and can lead to economic and physical displacement. Human rights violations, particularly for indigenous people, who have strong links to the natural environment, especially with the land, was also a significant concern for the panel.<\/p>\n<p>Although a company\u2019s ESG-related impacts may be challenging to measure, ESG reports provide valuable insights into current and future environmental and social risks, the panelists agreed. They can have direct and indirect financial impacts on profits and return on investments.<\/p>\n<p>With increasing awareness and understanding of ESG risks among the investment community, the pressure is now being placed on companies to improve disclosure.<\/p>\n<p>The bottom line, the panelists agreed, is the need for companies to increasingly incorporate ESG risks into their business planning, operations and communication strategies.<\/p>\n<p>\u201cOver the past five years, companies have been much more active on specific governance and social issues of ESG-related risks,\u201d said panelist Melanie Hennessey, vice president of corporate communications at\u00a0NovaGold Resources\u00a0(TSX: NG). \u201cThe data shows that over time companies that have developed and reported on ESG metrics perform better than those who don\u2019t.\u201d<\/p>\n<p><em>(This article first appeared in <a href=\"https:\/\/www.northernminer.com\/\"  rel=\"noreferrer noopener\" aria-label=\"The Northern Miner (opens in a new tab)\">The Northern Miner<\/a>)  <\/em><\/p>\n<p><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Over the past five years, companies have been much more active on specific governance and social issues of ESG-related risks.<\/p>\n","protected":false},"author":47,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center 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