De Beers passes Newmont to lead ESG ranking of global miners
The world’s biggest diamond producer may not be the first name that comes to mind in a ranking of top environmental, social and governance (ESG) performers. But that’s what the latest industry survey revealed.
De Beers scored the highest in London-based Alva’s quarterly rating of ESG perceptions this week gleaned from publicly available content from social media to NGO research. The unit of Anglo American Plc snagged the top spot in the first quarter from gold heavyweight Newmont due to an increased focus on equality and sustainability.
The report showed the mining industry as a whole lifted its ESG rating amid a string of greenhouse-gas pledges, which offset water management and waste concerns. Companies around the world, particularly raw-material producers, are stepping up sustainability efforts amid heightened scrutiny by the general public and investors. ESG and value-focused exchange-traded funds recorded net inflows of $89 billion in 2020, almost three times 2019 levels, according to Bloomberg Intelligence.
Sibanye Stillwater Ltd. scored the second-highest in Alva’s ratings report and showed the biggest improvement from the previous quarter due to its partnership with Johnson Matthey Plc to find more efficient uses of critical metals used in batteries.
Vale SA scored the lowest ESG rating despite reaching a settlement with Brazilian authorities over a 2019 dam disaster. Vale’s result “is a combination of greater visibility around the original negative story and then dissenting voices on the settlement itself,” said Alastair Pickering, co-founder and chief strategy officer at Alva.
BHP deliberates ditching fossil fuels for greener mining
The world’s biggest miner, Australian-based BHP, is supposedly considering withdrawing from a multi-billion dollar contract, which would see the company generate more than US$2bn due to mounting pressure over aligning its business with ongoing climate concerns and ESG-compliance measures.
Exiting the agreement would mean BHP escalate its distancing from oil and gas and subsequently cut down on the amount of fossil fuels used by the company when mining.
It’s estimated that the petroleum business being debated upon could actually be worth around US$15bn but is still under talks to be put up for sale.
Global Mining Giant Considers Greener Future
BHP has made itself clear that it wants to avoid becoming unable to sell its assets. As competition within the market increases following higher numbers of oil giants wrestling with investors to deal with climate pressure, so too are the number of mining rivals looking to make environmental changes for the future.
However, BHP currently has the upper hand as a stalwart mining company that established itself back in the 1960s, allowing it the time to grow and dominate over other fast-appearing mining competition.
Mike Henry, BHP Chief Executive, has an optimistic outlook for the future of oil and gas despite worries over rising demand to align his business with the Paris Climate Agreement. Henry argues that prices remain promising due to a lack of industry-wide investment.
BHP’s petroleum business won’t be easy to say goodbye to. Forecasted to generate around 6% of profits during the ongoing financial year (US$2bn), and around US$1.6bn revenue produced by BHP petroleum in the six months leading to December 2020, BHP is due to take a hit no matter what agreement they choose.
On the other hand, distancing itself from thermal coal and petroleum would arguably aid the company’s case to possible - and valuable - investors who may be required to fund BHP’s increased output to places such as Australia and Mexico in the near future.
BHP considers cutting billion-dollar contract to aid climate
An exit away from petroleum has the potential to be “a powerful corporate catalyst,” says Dominic Kane, Analyst at JP Morgan.
“We believe an exit would likely ring-fence BHP’s exceptional cash flows for non-fossil fuel organic growth, mergers and acquisitions and generous shareholder distributions since BHP could avoid a major new capital investment phase this decade in petroleum.”
BHP is also set to sanction a giant US$5.7bn Canadian potash mine in August of this year, already seeing potash as a long-term substitute for gas and oil going into the future. The company has also previously announced plans to abandon its 80% share in its joint endeavour with Mitsui, owner of two lower-quality mines in Queensland, Australia.
BHP is scheduled to report its annual results on August 17, after which it may become clearer on whether the company will choose to focus its shift to a low-carbon economy or whether it will stay with its current contract into the coming year.