ESG investing in a post-pandemic world

Could there be a quiet revolution underway for more change than ever seen before?

As the world battles with the Covid-19 pandemic, resulting in the economic fallout faced by all industries, securing their short-term financial future is crucial. However, the environmental, social and governance (ESG) concerns haven't been forgotten about. It's taken on a new meaning as companies responsibilities change direction slightly as workers and local communities health has come to the forefront.

Experts say the pandemic hit has refocused the interpretation of ESG for all three components, pointing to a more holistic approach. Many stakeholders and investors are viewing the crisis as a wake-up call accelerating the need for a different approach to investing to challenge the risks of a pandemic. As, if the industry learnt anything this year is Covid-19 created off the scale, unforeseen risks, shocking investors into action.  Investors want to avoid this happening again by future-proofing their portfolio against disruption in the supply chain.

It’s no secret that the mining sector is one of the last industries that investors would probably consider when talking about ESG. However, in recent years, the sector has made substantial progress towards achieving the ESG goals, including improvements to energy and water efficiency, emissions reduction and improved safety for staff. Mining companies can no longer extract without serious environmental, and regulatory considerations creating operational efficiency leaving a smaller footprint.

Grappling with the matters related to the ‘green’ or sustainability agenda for a while but it brings together a comprehensive framework to help navigate and balance the benefits of the natural resources, local communities and profit successfully. As well as being built upon ideas and initiatives by the socially responsible investment movement, changing the perceptions of the environmental impacts in operating methods to minimise their impact. In turn, this pressure companies are facing will help investors assess how well a company can handle unprecedented factors for better investment decisions. 

The impacts of the Covid-19 pandemic on the economy highlight the limits of most forecasting models which do not deal well with non-linear, complex risks. Investors are now starting to look beyond financial statements considering ethics, competitive advantage, proposing new standards and frameworks even more to measure mining investments. Helping to challenge and change the perception of the ESG impacts in the operating methods to minimise their impact in a resource sensible world to become safer, more efficient and sustainable, striving to meet ESG goals. However, some investors still feel that a choice exists between seeking returns and a commitment to ESG.

As long-term sustainability risks are likely to increase in a post-covid-19 world, investors are gathering pace to identify early leaders and assess where the returns will emerge that are better and more sustainable. There is a degree of fear that sustainability could be sidelined as the world adapts due to the new normality due to the recession brought on by the global shutdown acting as a distraction. The current global crisis could be seen as an ideal opportunity to reevaluate practices for ESG. The industry is yet to see if it accelerates the ESG milestones or if more talk, remains to be seen.

Mining Indaba Newsletter

Stay connected with our global mining and finance community.
Register to hear the latest news.