Global forces will push the mining industry to meet higher environmental, social and governance standards, regardless of whether ESG opponents gain power in the U.S. government after the upcoming midterm elections.

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Democrats have long favored forcing companies to report their carbon emissions and other measures of sustainability as part of their financial reporting. The SEC issued a set of draft rules in March that became a lightning rod on this issue.

Industry spokespersons and Republicans were against publicly traded companies being forced to disclose their direct greenhouse gas emissions.

"The climate disclosure rule isn't really about informed investor decision," Sen. Patrick Toomey, R-Pa., top Republican on the Senate Banking, Housing, and Urban Affairs Committee, said at a Sept. 15 hearing. "It's about equipping climate activists with data to run political pressure campaigns against companies, which will often be to the detriment of shareholders."

Rep. Dave Joyce, R-Ohio, said in an email that he expects a Republican majority to "hold the SEC and other agencies accountable for straying from their core mission to advance political goals."

But even if Republicans take control of both chambers of Congress in November, they will struggle to stall mining companies' move toward more reporting. As miners face both pressure from shareholders and reporting requirements resulting from their multijurisdictional presence, ESG reporting and policies appear to be locked in.

"At this point, it's gone past its tipping point," Mitchell Smith, CEO and director of Vancouver-based Global Energy Metals Corp., said in an interview regarding the potential backlash to regulating ESG, particularly greenhouse gas emissions in the U.S. "The world recognizes that we need to do things to curb the carbon emissions that are out there."

Globalization drives disclosures

Mining companies sell commodities in a global market, and many companies have worldwide operations. Changes to U.S. rules in the event of a sweeping Republican victory in November would do little to alter the regulatory environment faced by miners.

"Americans can sit here and argue about [ESG rules] across party lines, but the rest of the world is moving on this right now," said Aimee Boulanger, executive director of the Initiative for Responsible Mining Assurance, which provides social and sustainability certifications to the mining industry. "There's increasingly, out of the European market, mandatory due diligence to understand your supply chain, and to disclose harm in it, and to be actively showing that you're addressing these issues. And so, you've got U.S. companies, like Ford Motor Co., General Motors Co., or Tesla Inc. and others who may be based here, but they operate globally, and they are already having to be responsive to this global expectation."

The European Union, for example, began to implement its Sustainable Finance Disclosure Regulation in March 2021. The regulation establishes rules for what sustainability-related information needs to be disclosed by financial market participants and advisers, including those based abroad.

"Remember that for a large portion of this industry ... we're operating against global standards," said Keith Russell, managing director for the North American region at consultancy Partners in Performance, when asked if Republicans' response to the SEC rule would impact ESG reporting in the mining industry. "That combination between what the public wants, and what the economics are capable of, and what the technologies are capable of, are all coming together, and I think that will continue."

Investor pressure

The U.S. had approximately $12 trillion of assets under management in ESG-rated instruments in 2020, according to law firm White & Case LLP. Institutional investors surveyed by consultancy Environmental Resources Management's Sustainability Institute, meanwhile, have reported that they annually spend nearly $1.4 million on average collecting and analyzing climate data for their investment decisions.

These investors also have significant sway on companies' decision-making, forcing ESG issues to be front of mind for many in the industry.

BHP Group Ltd. shareholders, for example, have pushed the company to include a climate sensitivity analysis in its financial statements. Other companies such as Glencore PLC have faced investor pressure to divest their businesses in geographies of concern, such as Russia.

Bank ESG policies can also be a source of pressure on the mining industry as major financial institutions adopt their own ESG policies.

Written testimony for a Sept. 21 House Financial Services Committee hearing explicitly addressed climate concerns for banks and their clients.

"Climate change presents risks to Citi and its clients that will increase over time," Citigroup Inc. CEO Jane Fraser wrote. "We are committed to helping our clients mitigate these risks and transition to cleaner energy."

Fraught political playing field

Party lines have been drawn on ESG reporting mandates that could play out in 2023.

"I'm unsure if we'll see anything else ESG-related this Congress, but if Republicans take the House, they are likely to try and pass anti-ESG disclosure legislation," said Jacob Vurpillat, communications director for Rep. Sean Casten, D-Ill.

As the SEC now seeks to finalize the rule, Republicans are contemplating measures they could take if they win the House to stymie the SEC's efforts.

Joyce, for instance, introduced a resolution in April that would oppose the climate disclosure requirements proposed by the SEC, while other Republicans, such as Rep. Chris Stewart, R-Utah, are now considering restrictions on the SEC's climate disclosure program to funding legislation that will be introduced after the midterms.

Republicans have backing from the primary U.S. mining industry trade group, which includes coal miners among its members.

"[The National Mining Association] is concerned that mandatory disclosure rules — particularly related to nonmaterial climate-related risks — could proliferate investment bias and practices by investors and financial institutions to exclude certain energy-intensive companies and sectors from investment portfolios or restrict access to or significantly increase the cost of capital," said Tawny Bridgeford, deputy general counsel and vice president for regulatory affairs at the National Mining Association, in a June 2021 letter in response to the SEC seeking comments on ESG reporting.

National Mining Association members Barrick Gold Corp., Freeport-McMoRan Inc., Newmont Corp. and Rio Tinto Group did not reply to or declined requests for comment.

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