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Investing in the Future: ESG &
Mining / Event Summary
On September 22nd, 2020, Watershed Partners hosted Investing in the Future: ESG & Mining in collaboration with Arctic 360 and ERM, as part of our Watershed Dialogues virtual event series. We convened 48 interest-holders with diverse backgrounds and perspectives to discuss the role of the mining sector, Environmental, Social, and Corporate Governance (ESG) indicators, and investment, in pursuit of a shared, sustainable future. This group included six speakers, one moderator, 36 participants, and 15 Watershed Partners team members. We have included a full list of speakers below.
This event highlighted the potential for ESG and investment priorities to act as a lever for change within the mining sector, as well as the shortcomings and risks associated with its recent global emphasis.
This 2-hour virtual event opened with speaker introductions and commentary on the topic. The event moderator then asked a series of directed questions to the speakers, and these insights acted as a springboard for the breakout group discussions that followed. Each breakout group was facilitated by a Watershed Partners team member who captured notes and themes as the conversations unfolded on a digital whiteboard visible to participants.
During the breakout group discussions, we posed the following questions to support the flow of organic and thoughtful dialogue:
How has ESG evolved from 7 years past to now and what do you see 7 years in the future?
For those that incorporate good planning and ESG elements into their products, should there be a premium for stocks and valuations?
Can you see ESG to evolve to include the ‘I’ (Indigenous)?
What does ESG mean for the future of corporate citizenship for mining companies?
To cap off this experience, speakers and participants reconvened to share high-level insights from each breakout.
Here are five key takeaways that paint broad strokes of the ideas discussed throughout the event. Please note: these takeaways are a summary of a number of ideas and perspectives shared throughout the event, and do not represent a set of formal recommendations agreed upon by the diverse range of attendees who joined us.
Interest in Cross-Industry Collaboration for Mutual Benefit
One strong theme that emerged was a keen interest in meaningful cross-sector collaboration to mitigate risks to communities and the environment, and secure value for all parties involved. ESG compliance has the potential to produce better social outcomes, and create the stability that proponents and investors need to feel confident in their activities and long-term prospects.
Participants noted a disconnect between what many people experience on-the-ground and the indicators that are informing company decision-making at the highest level.
There is a ‘trust and information gap’ between workers, senior leadership teams, investors, and communities directly impacted by mining. The lived realities on-the-ground do not always align with the reports that go back to boardrooms or the public praise and awards that shareholders hear about. Messages can get lost or distorted as they move through the communication pathways between the mine site and executive level managers. If ESG is seen as a priority by the highest levels of leadership, but local staff are not being resourced to execute and no one is effectively consulting the community, there will always remain a gap between intent and reality. Similarly, if senior decision makers are receiving ESG reports indicating that operations are going well, they might miss red flags from individual mine sites or be caught off guard if things go wrong.
From investors hoping to leave a better planet for younger generations, to senior leadership teams increasingly integrating ESG into their practice, to Indigenous communities looking for genuine inclusion and self-determination, we heard about institutional challenges that need to be rectified, and a willingness to position collaboration as a critical component to making change.
The question that we are then left with is: What systems are needed to facilitate meaningful collaboration, and how will everyone work together to make sure they’re built right in the first place?
Indigenous Inclusion, Consultation, and Ownership within the Mining Industry
Participants were prompted to consider whether ESG should formally include ‘I’ (to represent ‘Indigenous’) as a way to include the unique perspectives, realities, and goals of Indigenous peoples into the foundation of ESG standards. A variety of insights were shared on the potential impacts of doing so and the legitimate work that needs to take place to strengthen how mining companies and Indigenous communities work together. Should ESG be broadened to include ‘justice’ as a principle, in relation to reconciliation? Should the ‘social’ dimension within ESG be fortified through an Indigenous lens? What would this mean for communities, investors, and mining companies? Would it make a meaningful difference or simply create another box to check? Furthermore, how do we move beyond Impact Benefit Agreements (IBAs) when thinking about Indigenous peoples’ participation and leadership throughout the lifecycle of a mine?
First Nations, Inuit, and Métis communities have long shared their experiences of being excluded from decision-making and leadership positions within the sector. Creating space for Indigenous representation within decision-making forums and frameworks was identified as an opportunity to alleviate the tension between the investment and mining sector believing there is a lack of defined and implementable ESG standards and Indigenous peoples feeling as though these standards have already been established without their critical involvement. As international dialogue on the intersection of ESG and the implementation of the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP) grows, committing to fostering inclusion and a sense of shared ownership over ESG and its outcomes is ever more critical. How can Indigenous peoples, industry, investors, and governments work together to create alignment on their understandings and expectations around UNDRIP implementation—and is ESG(+I) a potentially helpful framework to prompt these conversations?
One high-level question that was raised suggested moving away from expanding ESG as a concept and placing value instead on the actual material processes and outcomes for Indigenous peoples: what does ‘fair development’ or ‘real benefits’ for Indigenous communities actually look like?
Unpacking ESG: Moving Beyond the ‘E’ and Focusing on the ‘S’ & ‘G’
With the rise of ESG, there’s an undeniable focus on corporate citizenship. Investors are increasingly leveraging ESG to secure capital and are committed to supporting new operations that prioritize outcomes beyond the bottom line. ESG has moved the dial in terms of values and culture, but now is the time to better structure our understanding of what each of the principles mean for daily operations. There is a current and sustained focus on environmental considerations, and while substantively important, there needs to be an equal spotlight on the ‘S’ and ‘G’. Questions posed include: how does the industry define and measure social indicators? Who specifically is involved in further defining these standards? How do we collaborate across sectors and interest-holders to build out these indicators? Will investors have faith that ESG measures implemented by companies operating in jurisdictions without strong environment, social, justice, or governance laws are actually meaningful or being implemented? Furthermore, if we are shining a greater spotlight on relationships to remedy distrust and ineffective collaboration within the mining industry, how do we measure the effectiveness and strength of relationships in the first place, without losing nuance and important local context?
Ultimately, mining is not ‘static’. Throughout the mining sequence and post-closure, there are different ESG considerations that emerge. The financial model for mines changes over this sequence, as well. How could ESG be applied throughout the lifecycle of a mine in a holistic but adaptable way? Should there be value premiums for sites that reimagine their post-closure future to focus on the ‘S’ and ‘G’ as well as the ‘E’? Are there value premiums that exist in the early as well as the later phases of the mining sequence with respect to ESG that should be understood? What indicators are useful throughout the sequence other than moving beyond the signing of IBAs and reporting of environmental assessment conditions and approvals?
Efficacy of ESG: Voluntary Standards, and Interpreting Meaning
One of the largest barriers to consistent ESG uptake across a chain of operations, and throughout the industry as a whole, is the fact that voluntary standards are subject to the regulatory regimes of the regions in which they are being applied. Without committed structures in place to execute on ESG standards, good intentions can fall short; large gaps in expectations build and distrust intensifies. For example, good ‘social’ indicators might mean one thing in a country with strong human rights laws, but might be perceived as misleading in a country where forced relocation or political suppression is a norm.
Given this context, participants acknowledged that ESG practices will not be fully adhered to without supportive legal frameworks. A stronger legislative backbone might also support the industry by providing clearer policies and opportunities to share and leverage best practices across the board. Closer collaboration between industry, investors, communities, and governments is important for determining how ESG can set the tone for the future of corporate citizenship, social licence, and effective legislative regimes that meet the shared intent of all parties.
How do we explore the possibility of legislating ESG to ensure consistency, accountability, inclusion and equity in a manner that doesn’t hamper or detrimentally impact the investment, innovation and collaborative opportunities that exist across Canada?
Tensions between ESG Considerations and Global Competitiveness
At minimum, ESG provides investors and the mining industry with a set of standards to consider, however, some question whether belaboured conversations around ESG are holding the industry, and Canadian competitiveness, back. For a country like Canada that has legal standards in place already respecting various components of ESG, what additional value does ESG provide?
This sentiment connects to overall questions around the efficacy of ESG as a loosely defined, voluntary set of standards that might be better served through universally understood standards and global soft law to encourage domestic legislative regimes.
Some global competitors are forging ahead with large extractive projects and attracting substantial investment without including ESG as part of their daily operations or business model. If ESG practices do not become a universal norm, will those that focus on ESG attract less investment and be less relevant by virtue of being less competitive in the global landscape?
As expectations by governments, communities, and interest-holders for robust ESG measures rise in certain jurisdictions, will companies potentially face capital flight? Will those jurisdictions become less attractive for companies and investors?
Investing in the Future: ESG &
Mining / Next Steps
Watershed Partners was pleased to host this Dialogues event on such an important and relevant topic. Events like this generate more questions than they do answers—which is why Watershed Partners is committed to continuing the dialogue and advancing work on the topic of ESG.
We would like to thank everyone who joined this event for participating with energy and enthusiasm. We believe that active participation in conversations of this kind are an avenue to shared success and meaningful, systemic change. Throughout this event, participants acknowledged the progress that ESG has aroused within the sector, challenged its shortcomings, and began to identify opportunities to meaningfully improve outcomes in the future. Attendees also shared that ultimately, the mining industry needs to develop a shared and sustainable vision of success, and more work needs to be done across interest-holders to actualize this goal.
Please reach out to [email protected] to confirm your interest in being a part of future Dialogues events.