In modern times, Environmental, Social, and Governance (ESG) principles are becoming increasingly important for mining companies. These principles provide investors with a clear idea of a mining company’s commitment to sustainability and ethical practices, which are likely to have a direct impact on the long-term performance of their investments. However, many mining companies, as well as investors, are still unaware of the importance of ESG principles even though they can affect the value of an asset.
Seth Forman, an energy and sustainability expert, recently declared that ESG criteria can help mining companies manage financial, operational, and reputational risks. ESG aims to provide investors with crucial information about a mining company’s operations. This data can help investors identify and recognize potential risks before they surface.
ESG also offers investors a decision-making framework to identify the positive and negative elements of investments. For instance, investing in a company that takes an ESG-based approach such as minimizing greenhouse gas emissions or demonstrating an ethical management style, will result in a higher return with less risk than one without such standards in place.
Furthermore, it is important to note that ESG performance can also be used as a measure of a mining company’s success when compared to its peers on certain metrics. Research has found that mining companies that score higher on ESG measures tend to have better returns over the long-term, as well as lower volatility.
In conclusion, ESG has become an integral part of the mining industry. Companies that pay due attention to ESG criteria are likely to have better performance and attract more investors. Investors, on the other hand, should also ensure that they are making informed decisions when it comes to investing in mining companies. Using ESG criteria can provide investors with the invaluable data needed for making more informed decisions and unlocking the potential of their investments.
