To be considered ethical, investors must weigh up the development impact, sustainability and profitability in equal portion according to Namrata Thapar.
“In my view profitability and strong environmental, social and governance practices go hand in hand,” said IFC’s Global Head of Mining during a presentation at the International Mining and Resources Conference (IMARC) in Melbourne today.
The IFC — a sister organization of the World Bank – has seen an increased focus on sustainability in the natural resources space. This has meant that investors have increasingly realized that managing environmental, social and political risks protects long-term shareholder value and mitigates reputational and commercial risks, and this increasingly informs investment decisions.
This environment has created a niche for funds and financial instruments that allow ethically-minded investors to gain exposure to the resources sector. According to Ms Thapar, what these investors look for varies, but the broad principle is that investments do not negatively impact society and the environment, and to the extent possible have a positive impact.
What different funds or investors consider ethical in the mining sector will vary. In some cases, this may mean investment going to miners of battery materials, like lithium, to support the green energy trend, or like cobalt, an ingredient of electric cars. There has also been a gradual uptake of renewable power solutions for mines, especially hybrid solar photovoltaic systems,” said Namrata Thapar.
According to Namrata it’s essential that these organisations to have real, verifiable evidence that supports their sustainability message.
“Walking the walk is incredibly important, as governments, communities and civil society groups increasingly hold companies to account regarding their corporate policies and public commitments.
“Governments today regularly make use of experienced international advisors in monitoring and enforcing compliance. The frequency of communities stopping mining operations, for example by blocking access, has increased across the globe, from countries like Peru to South Africa. We’ve also seen the emergence of civil society groups that specifically monitor the performance of corporates against their policies and public commitments,” continued Ms Thapar.
While many may argue that good environmental and social governance performance is not linked with financial performance, Namrata is quick to disagree.
“Our experience has shown that proactive mitigation of ESG risks creates long term shareholder value. This value is created by ensuring alignment between stakeholders and thereby reducing the likelihood of disagreements between stakeholders, which can lead to cancellation of concessions by government, labour unrest and strikes, community blocking or stopping of operations and more which are all events that can negatively impact financial performance,” said Ms Thapar.
The IFC has delivered more than $23 billion in long-term financing for developing countries in the 2018 fiscal year across a number of sectors.
“Our expectation is that responsible investment will grow as a subset of the overall investment pie in the mining sector. Mining investors and shareholders alike would like to see their money bring positive impact – impact investing is on the rise,” said Ms Thapar.
IFC—a sister organization of the World Bank and member of the World Bank Group—is the largest global development institution focused on the private sector in emerging markets. We work with more than 2,000 businesses worldwide, using our capital, expertise, and influence to create markets and opportunities in the toughest areas of the world.
The International Mining and Resources Conference is Australia’s largest mining event. Bringing together over 6,000 decision makers, mining leaders, policy makers, investors, commodity buyers, technical experts, innovators and educators from over 90 countries for four days of learning, deal-making and unparalleled networking. IMARC will run from 29 October to 1 November 2018 at the Melbourne Convention and Exhibition Centre.
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