Commentary: Impact investment to play critical and growing role in mining sector

Impact investing has become a strong emergent trend over the last decade. It is a trend, however, that has largely avoided the mining industry, and the mining industry has largely avoided impact investors. Is the mining industry now ready for impact investors and should impact investors invest in the mining industry?

Andrew Cheatle on assignment at Troilus Gold's project in Quebec. Credit: Andrew Cheatle

Significant industry advances on ESG

Over the last two decades our mining, exploration, and minerals industry, has undertaken a positive seismic shift in its approach towards Environmental, Social and Corporate Governance (ESG) practices. Today, nearly 100% of mining companies address the ESG (or CSR) question through their websites, symposiums, corporate presentations or 'one to one' meetings with investors. Crucially, this is backed up by real activity on the ground and in the communities within which we operate.

The importance of societal acceptance, sound environmental management and good governance, in order to explore, develop, or produce, is fundamentally understood by our industry. Leading mining companies, for example, Anglo American, have gone a step further with their publicly stated purpose being: 'Re-imagining mining to improve people's lives.'

Commitment to best practice is embraced by members of the Mining Association of Canada (MAC), who sign up to and are transparently audited on their compliance with Towards Sustainable Mining (TSM) Principles, and annually report on over 20 performance indicators. Globally, members of the International Council on Mining and Minerals (ICMM) adhere to their Mining Principles as a condition of membership. Our industry can ill afford another Brumadinho type mine tailings disaster and is now actively working to prevent such a future occurrence.

Earlier this month, the Global Industry Standard on Tailings Management was launched, supported by the United Nations Environment Programme (UNEP), ICMM, and the Principles for Responsible Investing (PRI) - whose members manage assets of more thanUS$103 trillion. On the same day (Aug. 5), the World Gold Council also released its Retail Gold Investment Principles focusing on seven areas, including transparency along with responsible gold sourcing.

It is evident through our work, standards, developing principles, discussions, and social responsibility projects, that our industry continually demonstrates its ability to positively help build community and develop nations. For some, ESG is now a purpose, alongside discovering and mining materials for a modern society, while also making a return on investment.

Impact investing is emergent

In less than a decade, funds directly attributable to impact investors have grown from US$46 billion in 2014 to an estimated US$715 billion. If other funds with impact objectives and direct finance institutions are considered, the total market size could be valued at over US$2 trillion. The Global Impact Investing Network (GIIN) anticipates this trend is set to accelerate - a view supported by the World Bank, which through the International Finance Corporation (IFC), estimates the 'appetite' for impact investing is potentially a massive US$26 trillion. It's also believed that the trend towards impact investing will continue to grow as wealth is transferred to a younger, more socially aware, gender diverse, and activist generation.

But what is impact investing? GIIN broadly defines an impact investment as one made with the intention to generate positive, measurable social and environmental impact alongside a financial return. Such an investment challenges the paradigm that societal and environmental issues should be solely philanthropic, or that investments should be solely focused on fiscal return. Impact investors differentiate themselves as having intent, through their investments, to achieve or help achieve a specific ESG goal or Sustainable Development Goal (SDG). It is important to them that their investment has made a contribution, and that outcomes (including return on investment) are measured.

Investors entering the impact investing realm now include banks, family offices, foundations, pension funds, high net worth individuals and faith directed investments. The GIIN analysis of impact investments shows a great diversity of sectors, investment quantum, and geographic and business stage maturity. Their annual investor impact survey (2020) also reveals that the mining industry does not feature as a category, and that most impact investments go to sectors including energy, financial services, forestry, food and agriculture, and microfinance. The exception is the IFC, which has spent the last 60 years as an impact investor and continues to invest in the mining industry. Those who have received IFC investments, becoming IFC clients, are familiar with the IFC Performance Standards and their positive impact on business and community and host government relationships. A fresh look at mining by other impact investors will show that we offer the will and the means to achieve their goals.

This matters

Increasing alignment of purpose exists between the mining industry, its best practices, and impact investing goals. However, regardless of a growing alignment, currently, and on the whole, impact investors and the mining industry stand apart - and are perhaps even mistrusting or misunderstanding of each other. If we stand together, there is great potential for the goals of the mining industry, society, investors and governments to be met through aligned purpose and to meet development challenges such as poverty, education, inclusion, and climate change head-on. Impact investors should confidently enter our industry through either direct investment or a partnership in local businesses, to provide sustainable local supply, services, and develop communities.

At The Northern Miner's upcoming Global Mining Symposium (Sept. 1-3), we will be exploring the role of impact investing and its potential investment in our industry. Through this event, we aim to start building trust and reaching out to an investment community that seeks to improve society, just as we do.

- Andrew Cheatle is a mining executive/director and geoscientist. He is passionate about the mining industry's role in community and national development.