Australian mining magnate plans global green energy drive
Australian mining magnate Andrew Forrest has outlined ambitious plans to build a renewable energy business, aiming to compete with oil giants to provide low-cost green energy globally.
The billionaire owner of Fortescue Metals Group – the world’s fourth-biggest iron ore miner - says Fortescue Future Industries (FFI) has signed preliminary deals in countries like Papua New Guinea, as well as in African countries, and a team of executives is looking for other partners.
“We are building a portfolio of renewable assets, energy producing assets around the world,” Forrest, Fortescue’s chairman, told the company’s annual meeting via video link from Paraguay, according to a Reuters report.
He adds that Fortescue has already committed £550 million out to 2023 for the project and expects to use off-balance sheet financing for it as well.
“With scale and innovation, we will be able to ramp up supply of green hydrogen and green ammonia to deliver low cost energy reliably at industrial scale to customers all over the world,” he states, explaining that hydrogen and ammonia fuel cells are set to be used in transport and shipping, ammonia in fertiliser and hydrogen also in steel making.
Forrest, whose net worth is estimated at around £13 billion, says that the company’s initial target would be to have 235 gigawatts (GW) of installed energy capacity, but did not provide a timeline for when this would happen.
Gero Farruggio, head of global renewables at research firm Rystad Energy Farruggio, says that such a target would be extremely challenging to achieve, pointing out that energy major BP, by comparison, plans to produce 50GW of renewable energy by 2030.
Despite the coronavirus pandemic, Forrest has been touring the world and says that executives have visited 23 countries to shortlist partners for the venture, and plan to visit 24 more, with investments tied to human rights obligations and equal opportunities.
Fortescue has committed its own operations to be carbon neutral by 2040 and has been accumulating licenses and patents during the last five years to further its plans.
Forrest’s net worth has tripled over the last year, according to Australia’s Financial Review Rich List. Fortescue posted a net profit of £3.5 billion in 2019, due to a mix of high prices for iron ore and better margins for its products.
Mining investors demanding sustainability
Mining company shareholders are demanding change from an industry whose reputation has been battered by deadly collapses of mine waste storage facilities in Brazil, and Rio Tinto’s destruction of sacred rock shelters in Australia, report Reuters.
Companies are responding with changes to the structure and skillset of their senior management - a shift investors and governance experts say is sorely needed to mitigate risk in an inherently hazardous industry.
“The level of understanding and capability at board level is insufficient at the moment in the mining sector, and it doesn’t yet in our view support the transition of these companies to best practice,” Andy Jones, metals and mining lead at investment manager Federated Hermes, said.
Brazil’s Vale SA - keen to show its dedication to safety and sustainability after two tailings dam failures in less than four years - recently announced the biggest shakeup in its board since it was privatised in 1997.
Seven of the 13 members of the new board set for approval this month have extensive experience in ESG and sustainability-related issues, up from five previously. The company has also added requirements for nominees to have experience in community relations.
AngloGold Ashanti last year appointed as a non-executive director a mining governance adviser to the United Nations Economic Commission for Africa, Kojo Busia, after the board identified the need to increase its efficacy in ESG oversight, it told Reuters.
Barrick Gold also bolstered its ESG credentials with the appointment of World Bank executive director Anne Kabagambe to its board in November, highlighting her experience in international development.
Some miners have also begun tying executives’ and directors’ bonuses directly to measurable ESG outcomes. Rio Tinto has connected 15% of executives’ annual bonuses to ESG metrics for the first time.
Bonuses for the director of Vale’s executive board for safety are calculated based only on health, safety, and sustainability indicators.
But companies must also improve internal reporting and foster a culture of openness if the industry is to prevent a repeat of past mistakes, governance experts say.
“The remuneration is obviously key in terms of setting incentives, but that on its own doesn’t work unless the board is getting the quality of information and there is a spirit of independent thought and challenge,” said Joanna Hewitt, a partner at law firm Baker McKenzie in London who advises companies on corporate governance.
For boards to exercise proper oversight, directors need access to information that bypasses management, Daniel Smith, a governance advisor with CGI Glass Lewis, told Reuters last November.
To achieve that, a specialist heritage advisor reporting directly to the board could be appointed, or a board could have an ESG subcommittee responsible for stakeholder management, including of traditional owners, he said.
To help investors track their progress, mining companies must publish more data on issues like community engagement, water and air quality, and rehabilitation and closure plans, said Charlotte Valeur, founder of governance advisory firm Global Governance Group.
As a result of investor pressure, more mining companies are reporting so-called scope 3 emissions data, a measure of downstream CO2 emissions by metal consumers. Data transparency is key, says Valeur.
“It has to be deeds, not words,” she said. “What it’s easy to do is have some fluff - but what we want is hard numbers.”