The Church of England Pensions Board Tuesday said the natural resources sector must embrace change and build confidence with environmental, governance and social savvy investors to keep investment flowing in.
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Register NowThe pensions board manages assets in excess of GBP2.3 billion ($3 billion).
Speaking at the annual Mines & Money exhibition in London, Adam Matthews, director (ethics and engagement), called on the industry to collaborate and increase transparency, and prove to investors that it is taking the right steps to tackle the mounting threat from climate change.
He said the CoE could walk away from industries that are, by nature, energy intensive and causing CO2 emissions, but added that society needed the raw materials that the sector produced to move toward carbon neutral.
ESG compliance has become an increasingly hot topic throughout 2019. As investors become more in tune with ESG requirements, miners are reacting to ensure they stay up to date and avoid any backlash. ESG refers to the three central factors in measuring the sustainability and ethical impact of an investment in a company or business.
Matthews said that the industry needed to collaborate with both faith-based investment vehicles and non-faith.
He cautioned that if companies didn't act then they faces the threat of investors voting with their feet and moving into more environmentally friendly industries.
Matthews said that the CoE was trying to set out a set of industry standards in the form of its Transitions Pathway Initiative.
The website for the program describes it as a "go-to" benchmark for corporates to use as a compass to prepare for a carbon neutral future.
"The Transition Pathway Initiative (TPI) is a global initiative led by asset owners and supported by asset managers. Aimed at investors and free to use, it assesses companies' preparedness for the transition to a low-carbon economy, supporting efforts to address climate change," the website said. The program was launched in 2017.
Matthews said that for the movement to work, there also needed to be a clear regulatory framework messaged downby governments.
He said that one large thorn in the side of the move to a cleaner, sustainable way of life, was heavy-handed lobby groups acting on behalf of big business.
Analysts at Russian investment bank Renaissance Capital said in a recent report that the incorporation of ESG standards into financial analysis is gathering noteworthy momentum, especially in the mining sector, as investors begin to notice their significance.
The company said safety and corporate governance have traditionally occupied center stage from an ESG perspective. Nevertheless, environmental issues and most of all decarbonization of the resources sector are now key issues as governments look to lower emissions to maintain global warming below 1.5 degrees Celsius.
Matthews said that the main upside for companies' to embrace changes toward climate goals would be investors sticking with them for the long run.
He said that we are all now "focused on an outcome that something has to change...ESG is increasingly mainstream [and] growing significantly." He said more and more funds were integrating ESG guidelines into their modelling.
Matthews added that failure to act would potentially lead to a world 3-4 C hotter, one that would make it increasingly difficult for the industry to operate.
"A 3-4 degree world will be a challenge for every company in the room," he told the audience. Matthews added that he was pragmatic in his approach to climate change. "We have an issue that has to be addressed now."
Separately, on Monday the International Council on Mines and Metals said that its "Performance Expectations" for the mining industry would move into a new phase of implementation in January and it was hoped they might provide a framework for the broader industry's new drive on ESG principles.
-- Ben Kilbey, ben.kilbey@spglobal.com
-- Diana Kinch, diana.kinch@spglobal.com
-- Filip Warwick, filip.warwick@spglobal.com
-- Edited by Jonathan Dart, jonathan.dart@spglobal.com