Mining companies call themselves green in search of investor cash

Mining companies are trying to use large amounts of cash for green investment by promoting the production of materials used in wind turbines, power lines and batteries.

They downplay the environmental impact of their business, and for many of them, their large companies are mining coal.

In a May report by the International Energy Agency, coal mining will decline dramatically over the next few years, but in a global economy focused on reducing carbon dioxide emissions, “the minerals needed to move to clean energy Mining will increase very rapidly. “

For example, the demand for lithium used in batteries is expected to grow 30-fold by 2030, according to the IEA. Cobalt and nickel are also needed for batteries, but copper is used in power lines, electric vehicles and wind turbines. “Metal is the center of a new economy and the key to the transition to new technologies, EVs and energy storage,” said Mark Wade, head of sustainability research at Allianz Global Investors.

“For us as an industry, the transition to a carbon-free society and what that means for both the supply and demand of our products will be a decisive issue in our time.” Mark Kutifani, CEO of Anglo American PLC, said at a recent Bank of America conference. London-based Anglo American has the products needed to move away from fossil fuels. By providing it “becomes part of the solution,” he said.

Mining companies are trying to differentiate themselves from fossil fuel producers.ExxonMobil, a major oil company Co., Ltd.

And Royal Dutch Shell PLC suffered a defeat in late May by environmental groups and investors urging companies to address concerns about global warming. This pressure is how dramatic the environment is as oil and gas producers face scrutiny from environmentalists as well as large investors who are increasingly shifting capital to renewables. Indicates whether it has changed to.

According to Moody’s, the more severe investor-led climate and potential emission behavior could lead to higher costs of capital and reduced access to oil companies’ capital.

The mining industry faces similar risks. This is an energy-intensive business with a huge environmental footprint. Companies often use toxic chemicals to process their materials, but waste is stored behind dams, which can be huge and unstable. Coal used to generate electricity is one of the worst causes of global warming. Companies also often operate in developing countries where corruption is widespread.

Daniel Chigmira, an analyst at Bernstein Research in London, who tracks mining environmental, social, governance, or ESG indicators, said this has kept some investors away from the sector. She says that some investors who sought her advice a few years ago stopped investing in mining companies.

Many of the company’s customers, “I’m in charge of the mining industry, so I don’t talk to me,” she said.

This has become a serious problem for the industry as investors are using ESG factors more than ever. So far, by 2021, nearly $ 3 for every $ 10 of global equity inflows has flowed into ESG funds, according to Bank of America. The company’s tracked assets under management of more than 1,900 global ESG funds reached a record $ 1.4 trillion in April, more than doubling from a year ago.

The unlikely mine giant seizing the clean energy mantle is Glencore GLNCY -2.25%

PLCs are the world’s largest producers of steam coal used in power plants, as well as the world’s largest producers of cobalt used in rechargeable batteries. “We are ready to support the transition to a low-carbon economy and achieve our net-zero ambitions by 2050,” Glencore said in February.

Glencore is also a large copper producer in Chile and the Democratic Republic of the Congo. According to RBC Capital Markets, electric vehicles use three times as much copper as vehicles powered by internal combustion engines. The RBC estimates that copper demand for electric vehicles will increase from about 1% in 2020 to 6% of global demand in 2030.

However, Glencore has some significant ESG hurdles, especially large steaming operations. The company says it plans to phase out coal production over time, but the process can take decades.

Its activities in Congo are subject to scrutiny by investigators in the United States and elsewhere. In 2018, the company announced that it had received a subpoena from the US Department of Justice for records of US anti-bribery and anti-money laundering compliance in Congo, Venezuela and Nigeria. Glencore says it is cooperating with law enforcement agencies.

Bernstein’s Chigumira said such issues and Glencore’s extraordinary exposure to steam coal mean that the company is not suitable for ESG-focused investors.

Among the major mining companies, she prefers Newmont Mining, a gold mining company that has focused on ESG factors for many years.She also likes BHP group Co., Ltd.

Has an important copper business and limited thermal coal production.

However, BHP is also a major player in iron ore and metallurgical coal used in steel production, both of which are major sources of greenhouse gases.

That could be a problem for BHP in the future, Chigumira said. Investors are primarily focused on steam coal for electricity, but as more companies take emissions into account throughout their supply chains, they are likely to begin a survey of coal producers for metallurgy.

As they do, metallurgical coal “will increasingly hinder the way people think about BHP,” she said.