Mining’s “oversized relevance” to financiers and investors needs to be reflected in much improved performance measurement and incentivisation “architecture” which also gives the industry a better shot at building minerals and metals delivery capacity that sits remotely in line with the world’s forecast energy transition and mobility needs.
That’s the view of Church of England chief responsible investment officer, Adam Matthews, who is steering the Global Investor Commission on Mining 2030 as it tries to create a consensus across the finance sector for a “vision of socially and environmentally responsible mining”.
The commission is said to be backed by investors with circa-US$13 trillion of assets under management (AUM). Matthews also founded the $50 trillion AUM-backed Transition Pathway Initiative (TPI) which assesses publicly listed companies and sovereign debt issuers on climate risk governance via the TPI Global Climate Transition Centre at the London School of Economics.
He said in London the Global Investor Commission was moving quickly to assess the “kind of institutions, the architecture, that we need so that we can perform our function of stewardship and enable us to invest more and walk closely with this industry”.
“There’s an urgency to ensure that we can really in very short order get to a position that we’ve got the right way of understanding what the sector does to then be able to work with it to enable the transition,” Matthews said.
“As a pension fund we’re a generalist investor. Our exposure to the mining sector is relatively small, as it is for most generalist sort of pension fund investors.
“But then again our exposure to the mining sector is very large when you look at it through all the other sectors we’re exposed to: aviation, shipping, steel, etc. So this sector has an oversized relevance to, I would say, all investors at the moment, and yet we have a set of indicators [and] frameworks and ways of looking at mining that completely works against our ability to work with the sector to drive the best practice to become the norm of production and supply to all the supply chains that we’re exposed to.”
Matthews said “very significant” methane emissions were one “blind spot” in mining that needed to be addressed, while an “SBTi [Science Based Targets initiative net zero] transition pathway [and] methodology for looking at the diversified mining sector needs further evolution”.
“It’s ludicrous that there is no SBTi standard on diversified mining,” he said.
“You don’t yet have a clear framework that can pick up on the nuance that you have assets that are negative towards environment and assets that are positive towards environment [so] we have very simplistic tools, as it stands, that inform all the major investor networks and the major investor engagements with the sector that basically aren’t fit for purpose.
“There’s some real work to be done on ensuring we’ve got the right tools.
“But that should not [change] the fact that as investors we need to be working very proactively with the mining sector to ensure all those new mines that you keep hearing people saying are needed are developed in line with the best practice performance standards on environment and social issues.
“Codifying those [standards] … and then having the infrastructure to be able to ensure that we can take the data and align our investments and incentivise industry [members] that are really genuinely trying to walk the right path, is the way that the investing community needs to respond.
“A lot of our filters automatically underweight the sector, put it out of a lot of portfolios, and that does work against the long-term interests of what society needs, let alone the kind of confidence boardrooms need to be able to make long-term investments … particularly as enter some more challenging environments.”
Matthews said rapid movement on an industry-wide waste tailings management reset after Brazil’s 2019 Brumadinho disaster demonstrated what could be achieved. He said investors adopted a collaborative, sector-wide approach, partnering with organisations such as the International Council on Mining and Metals (ICMM) and the UN to develop the Global Industry Standard on Tailings Management (GISTM).
“While there is still work to do in this area, it’s highly encouraging that over half of the listed mining firms by market value are now committed to GISTM,” Matthews said.
“That was a very significant advancement in terms of dealing with the current companies that have tailings facilities and how they curate their waste.
“It’s given very clear attention to every board in terms of the expectations now from investors: 65% by market cap are committed to walking down the path of implementing that standard.
“I also believe it’s incentivising [development of new] technology to ensure that the industry is producing waste in a very different way as well.
“We’re very close to bringing to fruition a global institute that can oversee the independent support for that standard and companies operating to it, and the independent audit that needs to go alongside that and the transparency.”
Matthew said new efforts guided by the UN and backed by investor and industry groups to pilot a Global Legacy Fund to address the major “collective problem” of disused and abandoned mine tailings dams required a similarly collaborative approach to succeed.
“I know it’s difficult for [mining] companies because there’s a fear that you’re opening yourself up to potential future liabilities and that they’re going to be lumped with it,” he said.
“We need to approach this very much as a collective problem.
“Yes, there’s a contribution from industry but also from governments that have particularly benefited over time from that extraction in those countries.
“We’re very practically looking at how we address this legacy because there isn’t an option of not to do it.
“[It] will continue to anchor the whole sector … Whether or not you own that facility, which many don’t, you have a relationship with it because you’re the mining sector.
“The license we need from society [for] the growth in development of the future mines requires that issue to be addressed.”
*Adam Matthews, Church of England chief responsible investment officer, is a speaker at Resourcing Tomorrow 2024 in London, UK, from December 3-5.
