The transition away from fossil fuels towards green replacements will require more mining and processing of non-renewable mineral resources. Three billion tons of minerals and metals will be needed to deploy wind, solar and geothermal power, as well as energy storage to achieve a below 2- degree future.
As greater scrutiny is placed by regulators and consumers across a product’s entire supply chain, the mining industry’s impact on people and the planet will be more and more important.
Below are three sustainability issues that mining companies will need to consider in 2023 to respond to this spotlight:
Sustainability as a data problem
As it stands, we are in the territory of what I consider ‘badges:’ policies, pledges, commitments and ratings on ESG indexes. However, these are largely untested, and ratings agencies are blunt and inconsistent. In fact, a 56% divergence in the scores given by the top six indexes was recently uncovered. However, hard data on an economic activities’ real impact on issues that are material to the future of the planet and the people that live on it is increasing in demand.
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Just as financial accountancy developed a set of protocols and guidelines to determine what and how financial information is reported, we are seeing the development of protocols for sustainability related data. GHG protocols have already developed sophisticated measurement techniques for carbon emissions. Carbon will remain important but the demand for data on impact will expand to understand climate change as a biosphere health issue – water, air quality, biodiversity, waste, impacts on communities will all increase in prominence and require measurement. As large data systems and teams collect, code, calculate and report financial information to meet reporting requirements there is a need to build similar scales of systems to ensure uniformed data collection methodologies and reporting.
For miners, sustainability data will need to be collected at site and management tools will be required to measure impact at a site, portfolio and company level. As legislation places greater emphasis on reporting scope three emissions (the sum of the upstream and downstream emissions), this data challenge will only increase in complexity with data flows increasingly required to be thorough and uniformed between organisations.
Carbon credits as both a risk and opportunity
COP27 saw commitments that made the carbon market a key mechanism to reduce emissions and funnel money from developed to developing countries. John Kerry’s initiative, the Energy Transition Accelerator, is set to facilitate these flows of capital and the African Carbon Markets Initiative is targeting $6bn to the continent from credits. Although large scale flows of capital linked to the voluntary carbon market will occur under these schemes mining companies purchasing any offsets will be under greater scrutiny to understand and declare the quality of any credits purchased. Australia’s wealthiest man and miner, Andrew Forrest, estimated only 10-15% of carbon credits represent real emission reductions. Poor quality credits represent a substantial reputational risk.
In addition to representing a risk, recent advances and understanding of carbon mineralisation of mine waste (tailings) has highlighted the carbon reduction potential of waste heaps through carbon mineralisation. Australia’s Clean Energy regulator is currently considering the introduction of validating credits from this method. Developing technology to enhance the speed and extent of carbon mineralisation opens the opportunity for many mining companies to generate revenue from capturing carbon produced during their operations.
Greater role of blended finance
Large public policies, such as the Inflation Reduction Act, are set to create global ripples as more money flows into green endeavours; in this instance the Act is executing a $1.7trn commitment to green investment over the next decade. Blended finance, the use of public or private funds to de-risk negative contributions to sustainability outcomes, through combining concessional and commercial funding, is a mechanism likely to increasingly be utilised to deploy this influx of cash. This probability is evidenced by calls to use Article 6 of the Paris Agreement to galvanise blended finance in the developing world and commitments by foundations. For example, the Rockefeller Institute as well as Development Banks such as the European Bank of Reconstruction and Development.
Last year, the International Finance Corporation partnered with Anglo American to develop an education linked loan to achieve sustainability outcomes. This is likely to be one of many similar partnerships in 2023. The mining industry has an opportunity to maximise the value of new financial instruments that meet predetermined sustainability targets. The implementation will require a granular impact measurement and a greater depth of partnership between the mining sector and finance focused on sustainability. Miners will be responsible for building partnerships that create room for rigorous impact quantification, monitoring and evaluation. As technology continues to catch up to the industry’s needs, it will be essential for mining companies to find the right software to quantify, compare, forecast, and report a site, portfolio or company’s impacts on people and the planet.
