In order for natural resource companies to improve their Environmental, Social & Governance scores they need better metrics to drive performance, and realize the commercial opportunities, a panel discussion including ex-Governor of the Bank of England Mark Carney concluded.
During a webinar hosted by the London Stock Exchange, in conjunction with the Principles for Responsible Investment, Carney said that scenario analysis is crucial in the ESG process, and any move toward carbon neutrality, alongside the ability to harness data to realise "major" commercial opportunities.
The conversation also focused on the importance of investors to the green movement.
For the mining sector, ESG was undoubtedly a business buzzword in 2019, but its main thrust was the environmental pillar. The spread of coronavirus and the impact on societies across the world appears to have refocused the interpretation of ESG on all three components, pointing to a more holistic approach that aims for broader sustainability.
As the world battles the ongoing pandemic, and resulting economic fallout, industries of all types face the urgent challenge of securing their financial future.
David Blood, co-founder of Generation Investment Management, said that investors are a critical part of net zero ambitions, "they need information to make correct decisions." Blood noted that companies cannot hide behind ESG, he said that if people are simply saying things to tick a box "they will get caught out pretty quickly."
Adam Matthews, a director on the investment team at the Church of England Pensions Board, told S&P Global Platts recently that "we are all part of society ... [and] must acknowledge [our] connection to the financial [investments we make]."
During the webinar David Schwimmer, CEO of the LSE, said that as the exchange is home to some of the biggest natural resources companies in the world it is important for the LSE to support ESG initiatives and assist best practice.
Long way to go
He noted that natural resources companies are taking the right steps "but there's still a long way to go."
Talking to S&P Global Platts earlier in 2020, on the subject of what the mining sector is doing to comply with increasing ESG mandates from investors, Fiona Reynolds, CEO of ESG body PRI, said that market engagement had been "mixed" and the business still had some way to go. She said that from her experience it is investors who are driving natural resource companies to change their practices.
"I think without the shareholder pressure, miners would have come kicking and screaming," Reynolds added.
One thread throughout the webinar was that ESG methodologies need to be aligned, alongside portfolio allocation, and that a unified benchmark is essential to give investors the tools they need to park money in as effective a way as possible.
Stephanie Pfeifer, CEO of the Institutional Investors Group on Climate Change, said that "all actors need to drive in the same direction. Investors [play] a key role in the transition."
Carney said of the pandemic that it has given big business the chance to re-evaluate strategy and the energy transition, adding that businesses have "paused, reassessed and [are now ready to] accelerate."
