Green Risk & Greener Opportunity in Mining

A recent survey of 200 global mining executives by Ernst & Young (EY) reveals that 25 per cent of them list environmental and social issues as the number one risk and opportunity for the industry. This is up from fourth in last year’s survey. Decarbonisation is in second place and licence to operate in third. This change has been forced by stakeholder pressure, Australian Resources & Investment writes.

“The biggest factor has been the influence of the capital markets. Those capital markets reflect more and more what society is thinking,” says EY global mining and metals leader Paul Mitchell. “The other factor is just change in leadership ranks and just a better recognition of what people are looking for.

“The average CEO (chief executive officer) tenure is five years but 50 per cent of them turn over in two to three (years) and so you can almost get generational change in CEO attitudes every two or three years, and so those factors have been playing out and meaning this is much higher up the agenda for people and a much higher focus.”

Fortescue Metals (through the Fortescue Future Fund) and BHP are just two companies that have been pushing a greener focus recently as demands for environmental, social and governance (ESG) factors increase.

BHP has several initiatives designed to improve its green credentials. It has established a zero-emissions position for 50 per cent of its electricity consumption by 2025 and has also joined forces with South Korean steelmaker POSCO with a memorandum of understanding (MoU) to reduce greenhouse gasses in steelmaking. The company is still working on divesting its interests in fossil fuels. 

Stakeholder pressure is increasing across biodiversity and water management issues as well, which will require progressive mine closure plans.

“Forty-one per cent of mining executives surveyed are aiming to reduce their Scope 1 and 2 emissions between 2030 and 2040, while 49 per cent are aiming to reduce their Scope 3 emissions by 2041 to 2050.”

The stark choice facing mining companies is that unless they can control their emissions, they risk losing value and competitive advantage. The longer they leave it, the more difficult it will be, as shareholder attitudes harden and capital markets pivot to greener production.