Miners will increasingly adopt certification geared toward environmental, social and governance standards as they look to access capital markets and compete with one another to be seen as trusted operators, said Francis Sullivan, deputy chair of ResponsibleSteel, in a talk at the Mineral Exploration Roundup conference the Association for Mineral Exploration in British Columbia held Jan. 18-22.
"Credible mine certification is becoming mainstream as a way of providing a shortcut to ESG disclosure, due to the emergence of agreed standards of good practice in mining and metals production," he said, noting that in coming years, capital will start flowing to certified supply chains and away from uncertified ones.
There has been a sharp spike in ESG investing in recent years as investors and regulators increasingly require ESG accounting, Sullivan noted. ESG investing in the U.S. jumped nearly five-fold in the past decade to over $17 trillion in 2020, according to a recent S&P Global Market Intelligence report.
"So not only are investors getting more choosy, so are lenders, with many mainstream international banks setting lending policies to reduce the ESG risks of their loan books," he said.
Sullivan said certification will become increasingly common in the mining sector as it adopts measures that have been used in other industries such as coffee and timber. "The time has now come for a similar approach to be followed for mined materials supply chains," he said. "This gives buyers choice to seek out certified suppliers to improve transparency and reduce their upstream risks and carbon footprint."
Certification will be seen as a "mark of trust," giving investors, banks and other organizations a simple way to assess operators, according to Sullivan. Canadian miners stand to benefit, he said, in part because as ESG standards become more widespread, they will start to get credit for practices they may already be following, giving them an edge over miners who have yet to adopt the standards.
"It's more about getting credit where it's due," he said.
Miners are already beginning to consider certification, though widespread adoption has yet to occur, according to Sullivan. He expects larger-cap companies to lead the way in the mining sector, with venture companies following later. Some companies in Canada have already started considering certification of operations, he said, characterizing it as a competition to be seen as the most socially responsible and environmentally friendly.
As for the standards, Sullivan expects them to proliferate in the near term, eventually coalescing into fewer and more widely accepted certifications.
"And so if I was a mining company with a range of different assets, I'd be thinking, 'Well, what's the best standard to look at?' And I think now is now is the time to be choosy, deciding which are the best certifications," Sullivan said.