Responsible Investment in the Mining IndustryBy Paloma Duran | Mon, 02/08/2021 - 18:12
Q: What issues did PRI determine to solve when it was founded 15 years ago?
A: Back then, there was a lack of general knowledge about the importance of sustainability in investments. Previous ideas only focused on maximizing profits and adjusting returns. Today, we have discovered the need to incorporate Environmental, Social and Governance (ESG) issues. PRI’s objective is to create a network and platform for investors to share lessons and tools with the aims of incorporating ESG issues into their investment criteria. At first, PRI’s objective was to raise awareness about the importance of ESG in investments. Today, our goal is to promote the role of investors in creating better outcomes for society and to raise awareness about how they contribute to the UN’s Sustainable Development Goals (SDG).
Q: What is the perception in the investment community regarding the mining industry’s commitment to ESG?
A: Agriculture and mining are considered important industries for investments across the world. Currently, there are several efforts in the mining sector to incorporate sustainability outcomes into their commercial strategies. The sector has companies and investors that aim to comply with these ESG commitments, however, there are other companies that are lagging behind in these issues. The impact of extractive operations on citizens, who ultimately own these resources, can pose a significant source of operational, legal and reputational risk. Extractive companies are also wealth generators and play an important part in most investor portfolios. This provides investors with an opportunity to engage with these companies to ensure they are resilient and contribute positively to both shareholders and stakeholders, over the long term.
Q: What is a sustainable financial system and what are the main challenges it faces?
A: The sustainable financial system plays an essential role in how companies integrate and implement sustainability and ESG issues into their activities. The financial sector is highly fragmented because all actors have different levels of influence, so they have different ways of participating in businesses. As a result, PRI established the Sustainable Financial System program, working with investors, policymakers, regulators and others in the industry to realign the system with sustainable, equitable economies. Investors are key to achieving sustainable outcomes but they are not the only important participants in this process. Moreover, companies’ actions are also highly dependent on legal frameworks. This makes it difficult to implement a general standard on how companies and investors should behave. However, the PRI believes this is not impossible and each year, more companies and investors are joining this program.
Q: How does the Inevitable Policy Response to Climate Change project help investors?
A: The project aims to show that markets today have not adequately priced in the likely near-term policy response to climate change. This leaves portfolios exposed to significant risk and investors need to act now to protect and enhance value. That’s why PRI have launched this project, to provide investors with a realistic forecasting tool to help navigate this complex and evolving landscape.
Q: How can mining companies report and disclose their ESG efforts in a way that PRI signatories find meaningful?
A: The more transparency a company delivers, the more information investors have to make better informed investment decisions. However, information needs to be accompanied by quality and not just quantity, in that sense PRI is encouraging investors to properly implement the UN Guiding Principles as way to future-proof their approach to ESG issues. To understand their exposure to human rights risks and the actions required, investors need to request information from throughout the value chain: from their investment managers, other service providers and/or investees. Investors set expectations and influence others – to know, act on and show how they manage harm to people arising from their business activities and relationships.
Q: How does PRI’s “Driving Meaningful Data” program support better understanding between miners and investors?
A: PRI realized that a lack of consistent and comparable ESG data is a substantial barrier to their responsible investment practice. Driving Meaningful Data was created with the goal of enabling the flow of reliable and comparable data from corporations through the investment chain to beneficiaries and clients. One of the main objectives of the program is to define what is relevant data, what type of information is needed, what are the different sources of data and how investors should make decisions, among others.
Q: Are investors and the outcomes of ESG issues separate or do they reinforce one another?
A: PRI believes ESG issues and financial return are not separate factors, they both strongly influence each other. In some places, profits are considered the most important part of a business but investors need to acknowledge that their decisions impact ESG issues.
Q: How does PRI demonstrate to investors the impact of their decisions in the real world?
A: PRI’s Reporting Framework aims to be an accountability mechanism for signatories. We include minimum requirements that signatories must comply with to maintain their membership. Moreover, these requirements are not static, and are increasingly robust. For example, we are updating the framework of climate change, which previously was voluntary, then mandatory and eventually, it will include minimum requirements that investors and companies will have to comply with. PRI helps investors report on this framework and keep their actions accountable, ensuring they are not only signing the principles but working toward them.
Principles for Responsible Investment (PRI) is the world’s leading proponent of responsible investment. It has a set of six voluntary and aspirational investment principles that offer possible actions for incorporating ESG issues into investment practices.