ESG clarity for Aussie miners

ESG is back in the news, but less as a soaring investment profile that reached beyond US$35 trillion in assets in 2022, but as a part of the increasingly hostile US culture wars. 

In May, Ron DeSantis, the governor of Florida and a potential candidate for the presidency signed a bill that strictly opposes ESG initiatives.  

According to DeSantis, such initiatives are politically biased towards the left. This bill prohibits state officials from investing public funds in support of ESG goals. It restricts bond sales, commonly used to finance sustainable projects or reduce debt costs to meet the requirements. 

Even Larry Fink, Chairman and CEO of BlackRock, the world’s largest asset management company and a leader in ESG adoption, has stopped using the term due to its over-politicisation.  

But Fink hasn’t changed his views on the principles behind ESG. He and his firm still plan to talk the talk despite losing US$4 billion in managed assets (out of US$9 trillion) in the backlash. Blackrock has enjoyed one of its best years on record, let it be said. 

Jim Allenby, former professional cricketer and now Managing Director of full-service leader Parvate ESG, says that he has yet to see much backlash in Australia, but a significant shift towards clarity over what ESG investing is. 

“It’s a very polarising field and has been politicised, so what we’re trying to do at Parvate is make it more about facts and performance and less about ideology,” he says. 

“We stay out of the opinion market. That’s not our place to do that, but it has some connotations. I think, once again, that comes from the education and the lack of understanding of what it is. Certainly, our experience with clients is that once they see the process, they realise it is something they’re probably doing or should be doing anyway.”

“For a few years now, we’ve had this thought that it’s green investing or fully sustainable, but the point is to have some structure around what ESG investing is, rather than just the term being thrown around without having any evidence to back it up,” Allenby goes on to explain. 

And for Australian miners, impending changes to the JORC code are expected to have an increased focus on ESG reporting, particularly involving disclosure on environmental issues or native title disputes, something Allenby says is a topic of heated discussion with clients in the sector. 

“We need to know about this, let them know what’s happening next, and the indications are that environmental aspects are going to be included in these JORC revisions and various old-fashioned mining metrics and mining performances, and it’s going to come in that way, not just legislated from the government,” he says. 

“It will come in from all angles, especially the environmental side in Australia, as we struggle for our net zero ambitions. It’s going to start coming quicker than some may realise. 

“Our advice is you’re not going to get to the finished product quickly, but getting started is what the expectation is, and certainly investors, stakeholders, they want to see people are starting to measure at least their emissions and figuring out ways to improve.” 

Allenby says it’s not an impossible challenge but will require an early start, so whatever changes are necessary, miners have a chance of achieving them. 

A source close to the review process told The Australian Financial Review that if expected reforms came in, the skills required by a company’s competent person would likely need to be expanded beyond the necessary geology and metallurgy by JORC, created in the wake of a spurious string of discoveries during the 1970’s nickel boom. 

It is a conversation Allenby has had a lot lately. 

“I have that conversation most days and had one this morning! The competent person and directors will need some education and competency capability in ESG,” he says. 

“It’s the future of the business, which is what directors are responsible for, and the competent person needs to be able to make a consideration or a decision based on competency.” 

“ESG and especially climate is becoming a big part of that as much as the geology and the finances.” 

He expects a company director won’t need a sustainability degree but will undoubtedly require a basic understanding. 

“We’re working with a few universities because there is no ESG degree, yet it is this massive new field,” he reveals. 

“What happened at the start of this movement was you’d get a lot of environmental science experts come into the industry and be able to work on that side, then lawyers would come in for the social side.” 

But Allenby now sees that many accounting and finance professionals are learning about the industry. 

“Our main conversation with universities is with the tax, accounting and finance teams because they’re often the ones sitting within the CFO or COSEC,” he says. 

“We’re seeing finance-minded people or professional services upskilling an ESG through post-grad or online courses or in-person courses, but I don’t think it’d be too long until there’s an ESG-specific degree.” 

Allenby still coaches’ cricket, and after staying up too late watching a contentious Ashes series, he could see a couple of parallels. 

“There were a lot of glass houses and a lot of stage diving, and there was probably a little bit too much theatre, not enough good behaviour,” he says.

“It’s a good snapshot of how the world’s going. Everyone’s a bit confused. Are we trying to win, are we trying to do the right thing, or can we do both?” 

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