Unfortunately, issues associated with some of these metals are also far more material than for copper, making their inclusion in ESG portfolios harder to justify to responsible investors. For example, half of today’s lithium extraction is in areas of severe water stress, with mining and processing consumption impacting local communities and biodiversity.
Is it possible to be a responsible miner?
Despite the challenges any mining operation poses, the sector has steadily improved its practices, even if action in some areas has been driven by disasters or controversies.
The development of the Global Industry Standard on Tailings Management was driven by investors in the wake of the Brumadinho disaster.
This steady improvement in standards has enabled a limited number of transition metal miners to warrant consideration as responsible actors. Identifying these leading responsible miners with the highest ESG standards, and encouraging improvements in laggards, is one way of facilitating the energy transition.
Responsible miners can fit into an ESG focused approach
It is an inescapable fact that decarbonising the global economy requires significant quantities of copper and other transition metals. We must balance local socio-environmental impacts of mining operations with this need.
Investors can support responsible miners in developing the new projects needed to fuel the transition, whilst making certain management are well aware of the need for high standards at every stage of the project lifecycle.
From maintaining ongoing Free, Prior and Informed Consent to responsible waste management practices and site rehabilitation guarantees, there are multiple ESG standards for miners to maintain.
It goes without saying that whilst mining can enable the transition, the sector must also find ways to decarbonise itself and is a key component of any global pathway to net zero.
We must continue to be guided by data and science in order to make decisions in the long-term best interests of society and the planet. As investors, a combination of research and stewardship activities are key to ensuring a responsible and balanced approach.
Responsible Investments Team, Columbia Threadneedle Investments
