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S&P: Metals, mining companies rank among worst for environmental, social risks


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S&P: Metals, mining companies rank among worst for environmental, social risks

Metals and mining companies have some of the highest environmental risks across all sectors, ranking as high as oil and gas companies and coal-fired power generators, according to S&P Global Ratings.

Mining is "by nature hazardous to the environment," S&P Global Ratings said in its ESG Industry Report Card for the sector. The potential for damage to air, water and ground, combined with accidents that can take "a significant human toll," can hurt companies' credit ratings, the June 3 report said.

Metals and mining, oil and gas, and coal-fired generators received a slightly lower score for social risks but ranked among the worst there as well, trailing only the media industry. The coal generation sector received a lower social risk score, leaving metals and mining and oil and gas with the highest combined risk scores, according to the ESG Sector Risk Atlas from S&P Global Ratings.

For metals and mining companies, the high social risks are largely due to the industry's exposure to "safety management and social cohesion," according to the report. Mining entities face reputation issues, litigation and regulatory hurdles as nations increasingly demand that they be more socially responsible.

"Safety management is a key risk given the heavy use of large and dangerous equipment as well as the fact that some mining sites are located in remote and sometimes hostile environments," the report card said.

Each entities' governance risk depends on its risk culture, complexity and location. Companies with long-term business continuity do better in this category than more junior miners that take greater risks and focus on short-term gains, according to the report card.

Environmental and social factors are important to S&P Global Ratings' credit analysis of coal miners, including Murray Energy Corp. and Peabody Energy Corp. Thermal coal producers face stiff competition from natural gas in the market but also on the environmental front because gas emits about half as much carbon dioxide as coal, the report card said. Miners have to closely abide by health and safety regulations.

Land restoration is another important component to environmental risk determination, S&P Global Ratings said. Peabody reclaims 1.4 acres for every disturbed acre, which has earned it recognition worldwide, the report said. The company also has a strong global safety incidence rate compared with the industry average.

ESG is a "fairly complex risk" for top steel producers, such as ArcelorMittal, that operate around the world, according to S&P Global Ratings. ArcelorMittal intends to reduce its carbon emissions per tonne of steel by 8% by 2020 from 2007 levels and has reached a 6% reduction so far, the report card said.