Browsing: ESG

In terms of achieving net zero carbon emissions, the largest mining companies in the world have several options – each with merits and demerits – they can explore.  Mining companies can either divest, decommission, reduce emissions in existing operations, and/or offset assets that produce high greenhouse gas emissions (GHG).

Achieving net zero presents a dilemma because many of the largest miners have made their goal of reaching net zero by offsetting current emissions either through purchasing carbon offsets or investing in solutions that mitigate climate change.

Divesting assets, which is something Anglo American did with their coal assets which they spun off into a pure play standalone coal miner, will decrease a miner’s GHG emissions on a standalone basis. This move simply makes the emissions another person or entity’s challenge. The transfer of assets to third parties increases the risk that those assets may not be de-commissioned promptly or appropriately and will continue to contribute to GHG emissions far into the future.

Glencore has been for over 10 years in the cross-hairs of Global Witness, a non-governmental organization and lobby group established in 1993 that works to break the links between natural resource exploitation, conflict, poverty, corruption, and human rights abuses worldwide.
The organization has offices in London and Washington, D.C.
Global Witness has also in that time blown the whistle on what it describes as suspicious transactions and dealings in the DRC involving Glencore’s operations and its association with sanctioned businessman Dan Gertler.

A strong ESG proposition will enable a company to gain access to new markets and grow existing ones. As was reported in another article, “Doing Good is Good Business” certain aluminium producers were able to increase the margins on their products by eliminating carbon from their products and selling it to customers who are demanding more of that product.
For companies that rely on government contracts, having a comprehensive ESG proposition places them in good stead to receive increased business from governments of nations that are becoming more climate and green conscious.

According to leading business consultants when governing authorities trust corporate actors, they are more likely to award them the access, approvals, and licenses that afford fresh opportunities for growth.

Firstly, environmental criteria which consider how well a company performs as a steward of nature. This includes the energy a company takes in and the waste that it produces and the consequences for humanity as a result.
This aspect of the criteria also encompasses carbon emissions and climate change which have become highly topical especially in the ongoing COP26 conference in Glasgow. This aspect of the ESG criteria is important because every company uses energy and it is affected by the environment.
The social criteria which is second considers how that company manages its relationships with stakeholders namely employees, shareholders, lenders, customers, suppliers, and the communities where it operates. This feature addresses the relationships a company has and the reputation it fosters in the communities it operates in which may include labour relations, diversity, and inclusion.

Much of the talk at the moment, and nearly always, is where we should invest in a world of recession, low-interest rates, unpredictable markets and a challenging socio-political climate. As open borders in East Africa close, open, close and re-open again and as Kenya prepares for yet another Covid-19 lock-down our own region is particularly challenging.  

I am a member of several international investment groups and so I am fortunate to hear the views, perspectives and experiences of many clever and visionary investors around the world. I have written here before about ESG investing – Environmental, Social Impact and Governance – the “do’s” of impact invest but I haven’t written about the “Don’ts”. And it strikes me that we should be talking just as much, perhaps even more, about where not to invest at the moment and in the future.