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ESG in mining requires greater 'policing,' mandatory standards: EBRD director

Highlights

EBRD advocates use of CERA certification

ESG requires working with miners on transition: CoE

London — Many environmental, social and governance initiatives in mining require "much tougher policing," and the mandatory introduction of recognized standards, according to Eric Rasmussen, natural resources director of the European Bank for Reconstruction and Development.

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The mining sector needs to move away from the current situation where ESG is practiced largely on a voluntary basis, Rasmussen said during a Natural Resources Forum webinar on ESG.

To ensure a more consistent uptake of ESG, a certification standard such as CERA's Certification of Raw Materials system could be used, Rasmussen said. The EBRD supports this system, funded by European Institute of Innovation and Technology Raw Materials under the European Union's Horizon 2020 initiative, and which is also supported by various companies active in the mining sector.

"This might well become a mandatory system in EU for traders and miners to have in order to trade materials and trace them back to sustainable and good ESG in mining," Rasmussen said. "It's early days but I hope this will accelerate in the near future."

The certification system was recently developed by CERA, itself founded in 2017. It is described as "the first universal and comprehensive certification scheme that accommodates all minerals and regions." It is based on complete tracking of the commodity flow, using blockchain and other monitoring mechanisms and measures up raw materials values versus their production chain monitoring costs, according to information on the CERA website.

EBRD, involved in 65 countries, also has its own mining strategy with ten rules of operation or "commandments" to provide companies with an environmental and social framework in areas where there may be institutional or regulatory fragility, Rasmussen said.

Divestment may not be ESG-consistent: CoE

Aidan Davy, chief operating officer and director, environment program at the International Council of Mining and Metals, said during the webinar that the rise in investor interest in ESG has been phenomenal since the foundation of the United Nations' Principles for Responsible Investment in 2006: there has been a "dizzying pace of progress of the PRI in terms of signatories... with some $100 trillion in assets now under management, almost five times the GDP of the US," he said. Issues involving tailings dams and indigenous peoples' rights have come to the fore following recent incidents involving Vale, BHP and Rio Tinto, he added.

Adam Matthews, director of ethics and engagement at the Church of England Pensions Board and co-chair of the Transition Pathway Initiative, said:"We're at the dawn of a new dynamic," as ESG concerns have become linked to the transition to a low-carbon future and a mainstream core expectation of investors, who are being encouraged to make interventions to bring about systemic changes. Incidents such as the Brumadinho tailing dams collapse and destruction of the Juukan Gorge "bring into question the licence of the industry to operate," he said.

Matthews said he does not consider it consistent with ESG principles for investors to simply divest from areas such as coal or companies with interests in coal: the correct path would be to work together with companies to help achieve the transition towards low-carbon pathways, and to this end green bond issues will become an important market factor, he said.

Yulia Chekunaeva, director, capital markets, EN+ Group, said that the shoppers in supermarkets are increasingly scrutinizing the way products are produced.

"Soon they'll not only be asking not only how many calories are in a soft drink but for instance how the aluminum can it's in was produced," she said.