Gold miners lead the way in SA’s ESG mining disclosure ranking for 2019

ESG (environmental, social and governance) risk management company, Risk Insights, and ESG business communications firm, Instinctif Partners, recently released the South African Mining Sector ESG disclosure rankings for 2019. Findings for this report are derived from Risk Insights’ proprietary ESG GPS rating tool that uses AI and machine learning algorithms to transform publicly available disclosure reporting, integrated reports and media coverage into ratings for environmental, social and governance metrics. The research is based on disclosure and not the actual rating of the company. ESG GPS ratings use disclosure as part of its methodology to rate companies.

Anashrin Pillay, CEO of Risk Insights says, “A rising focus in stakeholder capitalism has exacerbated the need for mining companies to assess ESG risks and opportunities as a critical disclosure component. Many mining companies in South Africa have implemented voluntary ESG reporting standards over the last few years. Our research shows that governance disclosure still makes up more than 60% of total disclosure on average for the mining sector cohort in 2019. Social factors, including community involvement in mining companies, is 18,7% and environmental disclosure is 21,1%. ”

The rankings are based on TF-IDF scores that are completely independent and can be used by investors, corporates and other stakeholders to identify key ESG risks and opportunities for listed JSE players. The Risk Insights ESG database includes data for all listed companies on the JSE from 2016 – 2020, rated by sector for a particular financial year.

The JSE Mining Sector constitutes approximately 10% of the total market capitalisation of all JSE listed companies, contributing 9% to South African GDP and 2,6% to employment. The research was conducted across the 36 JSE mining sector shares with best 10 mining corporates ranked according total ESG (environmental, social and governance) disclosure.

Environment

In a sector where environmental factors are top of mind, Harmony Gold, Gold Fields and Sibanye-Stillwater are the top ranked companies in terms of environmental disclosure. Responsible energy and water usage in light of climate change and resource optimisation are key disclosure areas.

Kim Polley, managing partner, Instinctif Partners comments, “Mining companies are facing sharper scrutiny of the way they handle various environmental issues, including pollution, waste-water management, habitat protection and site remediation. This growing emphasis on ethics and sustainability is being driven by customers, investors, regulators and industry initiatives – as well as a genuine desire among some companies to operate in a sustainable way. Environment is also an area where the growing space of impact investing has an important role to play.”

This year, the World Economic Forum's Alliance of CEO Climate Leaders meeting in January 2021 focused its discussions on the decarbonisation of supply chains globally.  This group postulates that there are eight supply chains that cumulatively are responsible for more than 50% of global carbon emissions, and that acting to mitigate climate change specifically in these areas will have an enormous positive outcome in the war on climate change. 

Pillay believes that focused endeavours around mining supply chains could also help to move the needle significantly.  He says, “The decarbonisation of supply-chains has the potential to be a total ‘game changer’ for mitigation of private sector climate impacts. Addressing supply-chain emissions is a multiplier strategy that could see companies impacting a volume of emissions much higher than if they were to focus purely on decarbonizing their own direct operations alone.”

Social

The gold miners again come out as the top ranked companies in terms of social disclosure, where measures like employee health and wellness are considered. A big focus is the upliftment of communities in which the miners operate and the securing of social licence to operate.

Polley adds, “License to operate has evolved beyond the narrow focus of societal and environmental issues. There are now increasing expectations of shared value outcomes from mining projects. Any misstep can impact the ability to access capital or even result in a complete loss of license – particularly in light of the increased use of social media, which makes potentially negative publicity more globally visible than ever.”

Governance

Regulatory compliance, whether complying to the mining charter or carbon tax legislation remains the core disclosure for mining companies.

 “Governance disclosures, especially about health and safety protocols dominate all mining companies ESG risk registers. What is interesting is that the South African mining sector appears balanced when comparing governance, social and environmental disclosure,” says Pillay.

Overall ranking

Harmony Gold, Gold Fields and Sibanye Stillwater occupy the top three positions in terms of overall ESG disclosure. The research has shown that South African miners have broadly good disclosure.

Kim Polley adds, “It isn’t surprising that the gold miners rank so well; the industry has been robustly regulated for a number of years and has made many strong commitments towards ESG and sustainability goals globally.  In fact, the World Gold Council published a report entitled ‘Gold Mining’s Contribution to the UN Sustainable Development Goals’ in December 2020 that outlined how leading gold mining companies are making a significant contribution towards the UN’s Sustainable Development Goals (SDGs). However, what’s key is that there is a clear opportunity for other commodities miners to step up their own ESG agendas too. ”