day 2 - session 6: Sustainable Mining & conflict resources<br />Sustainable MiningAidan Davy – Senior Programme Director, ...
GLOBAL MININGINVESTMENT CONFERENCE 2010<br />Lead sponsors:<br />Media partners:<br />Other sponsors & participating organ...
www.icmm.com<br />Sustainable Mining:Extracting value from ESG performance<br />Aidan Davy, Senior Program Director<br />
Overview of presentation<br />www.icmm.com<br /><ul><li>Growing pressure on ESG disclosures
Mining sector risks overall and ESG issues
Investor interest in ESG risks
Selected ESG risks and ICMM activities/ members performance
Conclusion</li></li></ul><li>Growing pressure on ESG disclosures<br />www.icmm.com<br /><ul><li>Dodd-Frank Wall Street Ref...
Report payments by project and by recipient government (1504)
Provide quarterly reports on a variety of Health & Safety related matters (1504)
Due diligence measures on “conflict minerals” from the DRC (1502)
SEC issued guidance on Climate Change Disclosures (02/10):
Requires listed companies to disclose impacts of climate change
‘Physical impacts’ includes changes in water availability or quality
Investor-led calls to listing authorities and stock exchanges to require companies to consider the sustainability of their...
War/civil disturbance
Expropriation
Breach of contract
Life cycle aspects,  e.g.        recyclability, disposal
Chemicals management/  inherent HSE risks
Supply/value chain
Market access
Resource access – land, energy, water
Access to capital & talent
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Aidan Davy: Sustainable Mining (Day 2 - Session 6: Sustainable Mining & Conflict Resources)

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Day 2- Session 6: Strategic Metals and the Clean-tech Revolution

Sustainable Mining

Objective Capital Global Mining Investment Conference 2010
Stationers' Hall, City of London
28-29 September 2010
Speaker:
Aidan Davy - International Council on Mining and Metals

Published in: Investor Relations
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Aidan Davy: Sustainable Mining (Day 2 - Session 6: Sustainable Mining & Conflict Resources)

  1. 1. day 2 - session 6: Sustainable Mining & conflict resources<br />Sustainable MiningAidan Davy – Senior Programme Director, ICMM<br />
  2. 2. GLOBAL MININGINVESTMENT CONFERENCE 2010<br />Lead sponsors:<br />Media partners:<br />Other sponsors & participating organisations:<br />
  3. 3. www.icmm.com<br />Sustainable Mining:Extracting value from ESG performance<br />Aidan Davy, Senior Program Director<br />
  4. 4. Overview of presentation<br />www.icmm.com<br /><ul><li>Growing pressure on ESG disclosures
  5. 5. Mining sector risks overall and ESG issues
  6. 6. Investor interest in ESG risks
  7. 7. Selected ESG risks and ICMM activities/ members performance
  8. 8. Conclusion</li></li></ul><li>Growing pressure on ESG disclosures<br />www.icmm.com<br /><ul><li>Dodd-Frank Wall Street Reform and Consumer Protection Act (2010) includes provisions to:
  9. 9. Report payments by project and by recipient government (1504)
  10. 10. Provide quarterly reports on a variety of Health & Safety related matters (1504)
  11. 11. Due diligence measures on “conflict minerals” from the DRC (1502)
  12. 12. SEC issued guidance on Climate Change Disclosures (02/10):
  13. 13. Requires listed companies to disclose impacts of climate change
  14. 14. ‘Physical impacts’ includes changes in water availability or quality
  15. 15. Investor-led calls to listing authorities and stock exchanges to require companies to consider the sustainability of their business model</li></li></ul><li>Mining sector risks <br />www.icmm.com<br /><ul><li>Political instability
  16. 16. War/civil disturbance
  17. 17. Expropriation
  18. 18. Breach of contract
  19. 19. Life cycle aspects, e.g. recyclability, disposal
  20. 20. Chemicals management/ inherent HSE risks
  21. 21. Supply/value chain
  22. 22. Market access
  23. 23. Resource access – land, energy, water
  24. 24. Access to capital & talent
  25. 25. Climate change
  26. 26. Reputation
  27. 27. Business interruption
  28. 28. H&S and ESG
  29. 29. Failure of systems
  30. 30. Regulatory non-compliance
  31. 31. Commodity price
  32. 32. Interest rate risks
  33. 33. Currency Risks
  34. 34. Equity risks</li></li></ul><li>Risk convertibility in the mining sector<br />www.icmm.com<br /><ul><li>Life cycle aspects, e.g. recyclability, disposal
  35. 35. Chemicals management/ inherent HSE risks
  36. 36. Supply/value chain
  37. 37. Market access
  38. 38. Political instability
  39. 39. War/civil disturbance
  40. 40. Expropriation
  41. 41. Breach of contract
  42. 42. Resource access – land, energy, water
  43. 43. Access to capital & talent
  44. 44. Climate change
  45. 45. Reputation
  46. 46. Business interruption
  47. 47. H&S and ESG
  48. 48. Failure of systems
  49. 49. Regulatory non-compliance
  50. 50. Commodity price
  51. 51. Interest rate risks
  52. 52. Currency Risks
  53. 53. Equity risks</li></li></ul><li>ESG operational issues in mining<br />www.icmm.com<br />Ethical Business Practices<br />Labour & Working Conditions<br />Labour relations<br />Diversity and equal opportunities<br />Occupational Health & Safety<br />Labour issues in supply chain<br />Anti-corruption stance<br />Transparency<br />Political involvement <br />Environmental Responsibility <br />Energy and Greenhouse Gases Water resources (use, pollution, management)<br />Biodiversity Land (use, contamination, management)<br />Tailings management Solid waste management<br />Air emissions (excluding GHG) Emergency Preparedness Closure<br />Social and economic contribution <br />Artisanal and Small Scale mining Communities (impacts and social investment)<br />Conflict and security provision Involuntary resettlement of communities <br />Cultural heritage Local economic development<br />
  54. 54. Top 10 Global Pension Fund Markets ($20.4 trn)<br />www.icmm.com<br />Source: UNCTAD (2010). Investment and Enterprise Responsibility Review<br />
  55. 55. Scope and influence of Responsible Investment<br />www.icmm.com<br />UNCTAD analysis of world’s 100 largest pension funds: <br /> 135<br />51<br />Average AUM per fund (SUS bn)<br />73<br />No. of pension funds<br /> 27<br /> 66<br />22<br />No. of Responsible Investment indicators<br />No. of Responsible Investment indicators<br />As of February 2010, PRI had 700+ signatories (currently 800+) with AUM of over US$20 trn<br />Source: UNCTAD (2010). Investment and Enterprise Responsibility Review<br />
  56. 56. Do sell-side analysts give a XXXX?<br />www.icmm.com<br /><ul><li>Investigated overall impact of CSR strategies on securities analysts recommendations (16yr horizon)
  57. 57. Examined perceptions of analysts on value creation (or value destruction) potential of CSR strategies
  58. 58. Initially, CSR strategies perceived as value-destructing. Later, CSR strengths seen as value-creating: shift from sell to buy recommendations
  59. 59. Higher ability analysts more likely to reward CSR strengths</li></li></ul><li>ESG risks and project finance<br />www.icmm.com<br /><ul><li>International Finance Corporation (IFC) has set the standards for addressing ESG risks
  60. 60. IFC Performance Standards embraced by EPFIs – represents over 90% of project finance deals
  61. 61. Mining investments of over $26 bn between 2005 and 2009
  62. 62. Despite a dip in 2009, likelihood is that activity will increase
  63. 63. IFC Performance Standards under review – bar likely to be raised</li></ul>Project finance rise.... and fall<br />35<br />30<br />25<br />US$ billions (mining)<br />US$ billions (total)<br />20<br />15<br />10<br />5<br />Source: Harvard Business Review (2010). An overview of project finance and infrastructure finance<br />
  64. 64. Value of global mining sector M&A deals (US$ bn)<br />www.icmm.com<br />(September) <br />Transaction service providers increasingly address ESG risks as part of M&A due diligence<br />Source: PwC (Sept, 2010). Mining Industry Briefing: M&A in the Global Mining Sector<br />
  65. 65. Carbon Disclosure Project – Global 500 (2009)<br />www.icmm.com<br />Includes mining & metals<br />Performance scores<br />Disclosure scores<br />Note1: Materials includes: Metals & Mining (45%), Chemicals (35%) and Construction Materials, Containers & Packaging, and Paper & Forest Products (20%).<br />Note 2: As of September 2010, CDP initiative backed by 534 institutional investors with more than $64trn in AUM<br />Source: PwC (2009). On behalf of The Carbon Disclosure Project<br />
  66. 66. ICMM activity on Climate Change<br />www.icmm.com<br /><ul><li>Climate change is of significant interest to ICMM member companies
  67. 67. Mining industry estimated to contribute approx. 1.8% to global GHG emissions
  68. 68. Many metals produced are essential to pollution prevention ‘green technologies’
  69. 69. ICMM members working to establish themselves as part of the solution to the climate change challenge
  70. 70. Current efforts involve sharing information to improve understanding of issues and drive implementation of best practice technology</li></li></ul><li>Water availability & quality<br />www.icmm.com<br />Water disclosure scores by sector (out of 100): <br />Source: CERES (2010). Murky Waters? Corporate Reporting on Water Risks<br />
  71. 71. Increasing importance of Indigenous Peoples<br />www.icmm.com<br /><ul><li>Indigenous Peoples are increasingly important in terms of resource access
  72. 72. EIRIS, CAER and The Ethical Funds Company all promoting FPIC (ideally large ‘C’)
  73. 73. Not just NGO’s advocating: Co-Operative Bank’s support for Beaver Lake Cree Nations vs. Tar Sands in Alberta
  74. 74. EIRIS analysed 250 companies from FTSE All World Developed Index: Oil & Gas (47%), Mining (36%); Forestry (10%) and Agribusiness (7%)</li></li></ul><li>Indigenous Peoples – selected indicators<br />www.icmm.com<br />Agribusiness<br />Forestry & Paper<br />%<br />%<br />Oil & Gas<br />Mining<br />Indigenous Policy<br />FPIC (consent/consultation)<br />%<br />%<br />Resettlement<br />Indigenous employment<br />Source: EIRIS (2009). Indigenous rights: risks and opportunities for investors<br />
  75. 75. ICMM member ‘policy’ commitments<br />www.icmm.com<br />10 Principles for Sustainable Development<br />1. Implement ethical business practices and apply good corporate governance<br />2. Integrate SD in corporate decision-making 3. Uphold fundamental human rights <br />4. Manage risks based on sound science 5/6. Improve EHS performance<br />7. Conserve biodiversity & participate in integrated land use planning<br />8. Encourage life cycle approach to materials management <br />9. Contribute to community development <br />10. Publicly report, independently assure and engage openly and transparently <br />6 Position Statements<br />Mining and Protected Areas Mining: Partnerships for Development<br />Climate Change Mining and Indigenous Peoples<br />Mercury Risk Management Transparency of Mineral Revenues<br />
  76. 76. Reporting & Assurance by ICMM members<br />www.icmm.com<br /><ul><li>Adopting systematic approaches to reporting material risks, which reflects enhanced ESG performance
  77. 77. Undertaking robust assurance of sustainability reports to enhance credibility and trust
  78. 78. Understanding how/which ESG efforts contribute to value creation/protection
  79. 79. Enabling investors & analysts to better differentiate between companies</li></li></ul><li>Do mining investors respond to ESG factors?<br />www.icmm.com<br />Vedanta resources share price (2010)<br />
  80. 80. Concluding remarks<br />www.icmm.com<br /><ul><li>ESG factors are increasingly a mainstream concern for investors
  81. 81. Not just buy-side analysts, but increasingly sell-side analysts who have an interest and influence
  82. 82. ESG factors will continue to grow in importance in terms of project finance and M&A activity
  83. 83. ICMM members demonstrate leadership in terms of ESG commitments and performance</li></ul>“ESG analysis will benefit from improved reporting and corporate governance structures. But attention should also be paid to the need for improvements in the coherence and consistency of ESG analysis itself.”<br />UNCTAD (2010). Investment and Enterprise Responsibility Review<br />
  84. 84. For further information please contact:<br />Aidan Davy, Senior Program Director<br />aidan.davy@icmm.com<br />www.icmm.com<br />
  85. 85. GLOBAL MININGINVESTMENT CONFERENCE 2010<br />Lead sponsors:<br />Media partners:<br />Other sponsors & participating organisations:<br />

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