What does ESG mean for the mining industry?

The mining industry is naturally faced with the problem of how to balance economic, environmental and social values.

Under the trend of green and low-carbon, the new energy industry has ushered in unprecedented development opportunities. This has also further stimulated the demand for mineral resources.

Taking electric vehicles as an example, UBS has analyzed and predicted the global demand for various metals for 100% electrification of vehicles by dismantling an electric vehicle with a endurance of about 200 kilometers.

Among them, the demand for lithium is 2898% of the current global output, cobalt is 1928% and nickel is 105%.

There is no doubt that mineral resources will play a vital role in the process of global energy transformation.

However, for a long time, mining production activities have inevitably had an impact on the environment and society – the mining process may damage the ecology of the mining area, produce pollution and lead to resettlement.

These negative effects have also been criticized by people.

The increasingly strict regulatory policies, the resistance of community people and the questioning of NGOs have become important factors restricting the stable operation of mining enterprises.

At the same time, the ESG concept originated from the capital market shifted the judgment standard of enterprise value to the evaluation of enterprise environmental, social and corporate governance performance, and promoted the formation of a new valuation model.

For the mineral industry, the emergence of ESG concept integrates the environmental and social problems faced by the industry into a more systematic issue structure, and provides a set of thinking of non-financial risk management for mining enterprises.

With more and more supporters, ESG is gradually becoming a key element and lasting theme for the sustainable development of the mineral industry.

While Chinese mining companies continue to grow through overseas acquisitions, they also draw rich ESG management experience from international competition.

Many Chinese mining companies have formed awareness of environmental and social risks and built solid soft power fortresses with responsible operation.

Luoyang molybdenum industry (603993. Sh, 03993. HK) is the leading representative of these active practitioners.

In the ESG rating of MSCI, Luoyang molybdenum industry was upgraded from BBB to a in August this year.

From the perspective of the global mining industry, Luoyang molybdenum industry belongs to the same level as international established companies such as Rio Tinto, BHP Billiton and Anglo American resources, and leads the performance of domestic peers.

At present, the main mining assets of Luoyang molybdenum industry are distributed in Congo (DRC), China, Brazil, Australia and other countries, involving mineral product exploration, mining, processing, refining, sales and trade.

At present, Luoyang molybdenum industry has formulated a complete ESG policy system, covering issues of high international concern such as business ethics, environment, health and safety, human rights, employment, supply chain, community, anti-corruption, economic sanctions and export control.

These policies make Luoyang molybdenum industry comfortable in carrying out ESG management, and can play an important role in both internal management guidance and transparent communication with the outside.

In order to deal with different types of sustainable development risks, Luoyang molybdenum industry has built an ESG risk list at the headquarters level and all international mining areas. By formulating and implementing action plans for high-level risks, Luoyang molybdenum industry has incorporated corresponding management measures into its daily operations.

In the 2020 ESG report, Luoyang molybdenum industry described in detail the main risk points of each key mining area due to different economic, social, natural, cultural and other conditions, as well as the risk response measures taken.

For example, as a metal trading company, ixm’s main challenge is the compliance and due diligence of upstream suppliers. Therefore, Luoyang molybdenum industry has strengthened the environmental and social evaluation of upstream mines and smelters based on the requirements of ixm sustainable development policy.

In order to eliminate the ESG risk of cobalt in the whole life cycle, Luoyang molybdenum industry, together with Glencore and other companies, launched a responsible cobalt procurement project – re|source project.

The project uses blockchain technology to trace the source of cobalt and ensure that the whole process of all cobalt from mining, processing to application to end products meets the internationally recognized sustainable development mining standards. At the same time, it can also enhance the transparency of cobalt value chain.

Tesla and other well-known brands have established cooperation with re|source project.

The future market competition is not only limited to the competition of technology, innovation and brand, but also the competition of balancing economic, environmental and social values. This stems from the new enterprise value standard being formed in the whole era.

Although ESG began to rise in recent three years, the business sector has paid attention to ESG issues for more than half a century.

Relying on long-term ESG practice and radical ESG strategy, many old giants seem to occupy the highland of ESG, which adds a lot to their competitiveness in the capital market.

Latecomers who want to overtake in corners need to improve their all-round quality, including soft power with ESG as the core.

In the context of sustainable development, Luoyang molybdenum industry has deeply embedded ESG factors into the company’s development gene with its deep understanding of ESG. With the active practice of ESG, Luoyang molybdenum industry has developed steadily and healthily into an industry leader.

The market needs investment objects that can resist risks and continuously create benefits, and the society needs business organizations with a sense of responsibility and willing to share development achievements.

This is the dual value that ESG can create.

 

The above article is from ESG of alpha workshop and written by NiMo.For communication and  learning only.