LME Week 2020: Covid-19 and its impact on ESG

Featured Image: London Metal Exchange: LME Week official banner (Photo: LME)

With a second lockdown starting in many countries as a result of the Covid-19 world pandemic, environmental, social, and governance (ESG) concerns are higher than ever and seem to become an increased focus-point for sectors like the mining industry. The pandemic is likely to become a catalyst for the reinforcement of ESG requirements, as stated in a recent analysis by Jean-Xavier Hecker and Hugo Dubourg, Co-Heads of ESG & Sustainability Research at J.P. Morgan. The only fear remains that, in the light of an impending recession and an implicit volatile market, these priorities might shift, and investor activism might be put on hold.

Before the world went to a halt, the star of the ESG policies was the environment – and rightfully so. But, with the rise in the number of people affected directly and indirectly by the pandemic, the necessity for a more holistic approach seems to become definite, and investors are pressuring companies to act under the new ESG standards. With this investor activism getting traction, environmental campaign groups, and investor-led initiatives that want to bring the mining sector to a new standard of best practices, are trying to prevent further humanitarian and environmental disasters. From their efforts, a new word seems to stand-out, alongside ESG, and that is sustainability.

During the London Market Exchange (LME) Week, on 22nd of September, a new Sustainability Overview was released, with a particular focus on the impact that investors can have on installing good better governance in the mining policies, especially in jurisdictions where copper, lithium, nickel, and other metals required for the carbon-free energy transitions.

The LME three key factors that can turn the mining industry into a pillar for a sustainable future are: “maintaining a broad scope, supporting voluntary disclosure of data and providing necessary tools for change.” All of them are stemming from an ESG-compliant view of investing, which seems to be the main point of this year’s LME event. Mining operations are encouraged to promote the sustainable production of low-carbon products and to participate in a circular economy by increasing or maintaining their high level of transparency and assuming responsibility for their actions.

Hopefully, the ongoing pandemic will not delay too much the completion of these goals. For now, the LME and other industry initiatives are setting a new standard for how operations are meant to run, but it remains to be seen if the industry will have new challenges to surpass in the next few years, such as reducing the volatility of commodity prices, rather than achieving a net carbon-free economy.

References:

J.P.Morgan. (2020). Why COVID-19 Could Prove to Be a Major Turning Point for ESG Investing. J.P.Morgan. https://www.jpmorgan.com/insights/research/covid-19-esg-investing

ESG in mining requires greater “policing,” mandatory standards: EBRD director | S&P Global Platts. (n.d.). Retrieved November 4, 2020, from https://www.spglobal.com/platts/en/market-insights/latest-news/coal/101220-esg-in-mining-requires-greater-policing-mandatory-standards-ebrd-director

ESG metrics no longer a “fad” to mining industry: LME Week | S&P Global Platts. (n.d.). Retrieved November 4, 2020, from https://www.spglobal.com/platts/en/market-insights/latest-news/electric-power/102320-esg-metrics-no-longer-a-fad-to-mining-industry-lme-week

Kilbey, B., Warwick, F., & Forster, H. (2020). ESG and mining: sustainability after coronavirus | S&P Global. SPGlobal. https://www.spglobal.com/platts/en/market-insights/podcasts/platts-future-energy/102720-platts-future-energy-podcast-energy-transition-covid-coronavirus-carbon-emissions-energy