Pockets of the nation and the world seem to be on board to push the environmental, social and governance (ESG) agenda. It is prominent in the cancelling of everything from pipelines and fuel-driven vehicles to gas stoves and beef. Given this, the environmental responsibilities for mining are certainly on the minds of companies, workers and investors. Are they coming after mining next? Let’s begin with the buzz about ESG.
What is ESG?
The Corporate Finance Institute defines Environmental, Social and Governance (ESG) like this, “ESG is a framework that helps stakeholders understand how an organization is managing risks and opportunities related to environmental, social, and governance criteria (sometimes called ESG factors).” They go on to say that, “ESG takes the holistic view that sustainability extends beyond just environmental issues” and that “ESG is often used in the context of investing … as well as customers, suppliers, and employees, all of whom are increasingly interested in how sustainable an organization’s operations are.”
ESG Scores / Investments
Governmental pressure is today changing how capital allocations are made by many companies, particularly financial institutions. A new “company” score has been associated with ESG – meaning that the company offers solutions and measures for the environment, social impacts, and the governance of these. It is suggested that certain company stocks outperform based on ESG scores. In some cases, according to McKinsey, many investment managers are willing to pay a 10%-40% premium in a company that ranks high in ESG. These companies are often pressured to expose such data by certain legislation and regulation.
While the concept of ESG is not a new one, this sustainability measure has taken on a new meaning in recent years. The evolution of ESG is based on historical movements that surrounded health, safety, pollution, and the environment. The concept began around 1980 when pollution began to be pushed as a great concern for industrial corporations. Along came a push for more labor and safety standards. The terms “climate change” and “global warming” were established at this time. Then in the 1990s, a corporate sustainability movement emerged in which companies were encouraged to further improve their environmental impacts. In fact, such improvements were often used as marketing tools—what was eventually called “greenwashing.”
Finally, in the 2000s, the movement expanded to include social responses—or corporate social responsibility (CSR). In 2006, a United Nation’s Principles for Responsible Investment (PRI) report suggested that ESG be incorporated into company financial evaluations By 2015 to 2020, these movements emerged as ESG in a new globally required, stakeholder-led movement. In 2020, The World Economic Forum (WEF) and the International Business Council (IBC), led by Brian Moynihan (CEO of Bank of America) and including Deloitte, PwC, KPMG, and Ernst & Young, accelerated ESG through standardized measurements for companies to follow. Over 100 multinational firms in the council were committed to it.
Gold and ESG
While the media is silent about the environmental impacts of mining for obvious reasons, you might be asking when will the environmentalists will come after it? If there’s capital to be made, mining aftermath is not likely to make headlines anytime soon. As of now, a gold investment is still considered sustainable. No one is complaining about any harmful impacts, and investors still see gold as a pure and safe hedge against inflation. In fact, a gold investment can be made that relies on a vault in which the gold is never seen. Even though there is a controversy about what defines a sustainable versus a harmful investment, right now gold is an acceptable and positive alternative.
Why Gold Now?
Gold is highly coveted by the central banks, China, large-scale investors, and many others. With the mining process already scrutinized by the proponents of ESG, this precious metal is becoming more and more attractive. Andrew Stronach, Managing Director of Strategic and Corporate Development for Sprott Inc., states, “In tackling environmental, social and governance (ESG) concerns, the “social” stakes are high for mining companies.” He goes on to say, “Meeting the myriad social challenges is critical for miners, who may face higher costs and shuttered operations should conflict arise with their host community. Keep these factors in mind:
- It is true that the precious metals mining process uses a variety of chemicals and often comes with post-project environmental rehabilitation. Both cyanide and mercury are used to extract gold from ore. Mining companies do not always possess the sophisticated machinery needed to sustain the environment where surrounding trees, rivers, and soil are abused. This can lead to soil erosion, deforestation, and contaminated water. While most mining companies are working to ensure sustainable practices, now is a critical time in which mining could be stopped by powerful entities.
- ESG investments are currently declining with the state of the stock market while gold is historically shown to rise with a market crash. Keep your eye on the price of gold and other precious metals and buy before the price goes up.
- While ESG investments are rocky, gold is a tangible hedge against inflation—as long as mining is not shut down in the months and years to come.
Get Started With Gold
By working with a proven gold investment expert, you can ensure you are selecting gold from a reputable and sustainable source. Contact Reagan Gold Group (RGGUSA) and inquire about our current promo of up to $2,500 in free metals on qualified purchases. The nation is at odds and our financial security is at risk. A gold investment may prove to be an effective and safe strategy to prepare for what’s to come.