Overview

 

Industry is continually adapting to new environmental, social and governance (ESG) legislation and the evolving international paradigm on sustainable development, first captured by the 1992 Rio Declaration and now represented by the 2015 Sustainable Development Goals. ESG legislation in most countries has become more complex and will continue advancing, aligning with national challenges and international vision.

 

Where enforcement of ESG legislation is weak, pressure to manage impacts persists. Lenders, investors, affected communities, employees and consumers are demanding this. 

 

Standards and assurance, rating and reporting mechanisms have proliferated, aiming to provide stakeholders with insight on ESG risks and performance. 

 

Leading examples are the new ICCM Performance Expectations and the regularly renewed Equator Principles and IFC Performance Standards. 

 

Financial reporting authorities and stock exchanges are encouraging listed companies to demonstrate good ESG performance with codes and guidance that are becoming complex. 

 

The London Stock Exchange’s recent publication of guidance on ESG reporting reflects the reality that ESG is now a core part of the investment decision process.

 

This guidance also highlights the interest of equity investors in climate change impacts and energy management.

 

Increasingly, ESG risks are materially influencing the value of mining and other assets. The main areas of ESG risk are the permitting of new projects, water and waste management, climate action, social licence to operate and closure.

 

Permitting is protracted in many jurisdictions; it can take several years to obtain permits to develop new mines.

 

Biodiversity impacts are receiving more scrutiny in permitting processes, and procedures to demonstrate no net loss are becoming more complex. 

 

Stakeholders’ capacity to participate in and challenge permitting processes is strengthening.

 

While social licence fundamentals are becoming better defined, maintaining a social licence has become more demanding.

 

Compliance is also becoming a significant risk. It is no longer enough to acquire permits: compliance with the conditions of the approvals and agreements is receiving more attention. Fines for noncompliance are becoming costly and regulators are using their powers to stop operations until remedies addressing serious non-compliance are in place.

 

SRK understands the ESG challenges confronting our clients and this newsletter shows how we provide support to address these. It also showcases our technical depth in the mining sector.

 

While our focus is mining, SRK’s environmental and social management practitioners also work extensively in other sectors, notably infrastructure for mining assets. Our African offices regularly consult with the energy, agribusiness and manufacturing sectors.

 

Jane Joughin: jjoughin@srk.co.uk