Mining: Inclusive Investment for a New Triple Bottom Line
The biggest mining super-cycle in recent memory, beginning in the early 2000s and fueled by unprecedented emerging market growth, is now history: Head-counts have been slashed, fleets parked and exploration budgets flattened, with profits falling by 71 percent to $20 billion by 2013. This year, with the plunge of copper – and most base metals – the bottom fell out completely.
In the background, a different type of erosion has long since begun: Wholesale sustainability cutbacks – the timing of which could hardly be worse. A 2014 Harvard study crystallized the urgency, reporting projects worth between $3 billion and $5 billion posting $20 million losses from weekly delays. Embedded ever-deeper in frontier nations amid resource depletion, moreover, the true price for community conflicts is increasingly impossible to calculate – not least after production resumes at major operations.
Recognized as crucial to risk, reputation, access to capital and, increasingly, financial performance, sustainability is no stranger to the mainstream – with 72 percent of the S&P 500 and trillions of “responsibly-managed” assets in agreement. In mining, one of the world’s most balance-sheet driven, upstream sectors, meanwhile, the cost-benefit is often far less clear – yielding a unique opening for impact investors and others attuned to shared value in a circular economy.
On a planet hosting more than 2,000 mechanized mines, “writ-large” potential lies in the balance, according to people like Gavin Power, deputy director of the United Nations Global Compact, a partner to the U.N. Principles for Responsible Investment (UNPRI) which represents more than $34 trillion in assets under management.
“The industry has an historic opportunity to be the solution to global problems,” he said. “It covers labor, the environment, anti-corruption; it’s all-encompassing” – as are the UNPRI’s 1,250 signatories which represent 20 percent of global capital markets.
With its massive gold and platinum reserves – and more than 90 major protests over basic services through 2014 – South Africa provides an ecosystem of case studies. Top miner Anglo American, for one, has transformed operations wastewater into potable water for 80,000 villagers east of Johannesburg in a reverse-osmosis project now doubling in size – and being replicated nearby by giants BHP Billiton and Glencore. Other local Anglo initiatives address poverty through business grants in addition to HIV/AIDS prevention and treatment.
Participation by non-traditional investors in such endeavors is emblematic of a true triple bottom line: ensuring lasting positive impacts and maintenance of a social license to operate – ahead of a resurgence in commodities growth. Despite a weak global economy and a stockpiling of metals on the Chinese mainland, prospects for mining have seldom been better for long-term investors – and economic inclusiveness at its best.
Social impact entrepreneurs, whose cross-industry activities advance social performance before financial returns, can make a decisive difference. “Your company may be the first into a market where structures are weak, talent scarce and customers suspicious – while your trial-and-error may develop health care providers that can touch tens of millions of lives,” Matt Bannick, managing partner of Omidyar Network, wrote in the Stanford Social Innovation Review.
Corporate social responsibility (CSR) in mineral extraction itself is relatively new – even newer is the risk mitigation that drives institutional investment decisions, particularly among larger European banks, insurers and pension funds. Yet despite its dire need, systematic, proactive financial engagement remains elusive – even as successful examples abound worldwide.
As a nation, Chile, the world’s leading copper producer, is an innovator: In 2011, for instance, Santiago’s Mining Ministry joined 250 Chilean businesses to transforming them into world-class suppliers. Through $54 billion in investment, the World Bank now forecasts the 709,000 jobs servicing and supplying the mining industry to grow “substantially” – generating across-the-board prosperity any financier could wish for.
Owing to its vast mining industry, Chile is further energizing extractive firms across the continent – and Africa, Australia and beyond – to economize through renewable power. Here, too, opportunities for synergy are limitless – especially given the recent announcement of a global investor coalition committing $600 billion to carbon tracking and reduction by December.
One of the biggest challenges to aligning mining with the impact investing community in institutional terms is purely practical: In recent years, sustainability reporting has made impressive progress, yet beyond voluntary frameworks, categorically concrete and enforceable benchmarks remain elusive – despite extensive global efforts.
But the greatest gap is a socio-cultural one. Impact investors and miners inhabit separate worlds: One is often high-profile and cause-focused with deep commitments to change; miners, on the other hand, are introverted, hardworking and usually stubborn – their data-driven calculations, often bound by convention and legacy, lie almost exclusively below ground.
Yet both are united where it matters most – by a relentless, can-do attitude. And while standards and metrics mature, possibilities stand to resonate amid undeniably cyclical opportunities – and prospects for investment-driven change by the mining sector continues to swell.
Source: Triple Pundit
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