During the last 20 years, the mining industry has undergone a fundamental transition towards the sustainable development of natural resources, tackling its negative perception among key stakeholders, from employees to local communities and investors. However, the sector continues to battle its long-held reputation as a destructive force in nature and within communities in close proximity to mine sites. Recent high profile catastrophes have gone a long way to masking the extensive positive changes instituted by actors from across the mining spectrum falling in line with the now dominant Environmental, Social, Governance (ESG) thematic.
Left unchecked, the enduring smears on the name of the mining industry could result in a shutting out of what Digbee’s Jamie Strauss calls ‘a fundamental paradigm shift in investment process and beliefs’. This paradigm shift is predicated on the ‘tidal wave of money’ moving into the world of sustainability. In an address to the Mines and Money London audience in December 2021, Strauss referred to the US$275 billion worth of ESG bonds invested by Western European fund managers, resembling 63% of all the region’s bond flows in the year to date. This exponential growth in ESG bond flows was replicated across emerging markets and in the US, as well as in the equities space, where one in eight funds are ESG and there are now three times more funds under management in ESG than there were in January 2020.
Dismissing the idea of these inflows being merely a fad, Strauss tells RGN: “This is not a tide that goes in and goes out. These are being baked into structures and standards within professional fund management that recognise millennials and society pushing governments and the investing community.” Using the Digbee platform he created in 2016, Strauss aims to ensure the mining sector leverages the full power of the sustainability-driven investment paradigm shift, so it can fulfil its role as a key enabler in the global clean energy transition.
Ahead of the curve
Strauss comes from a mining finance background spanning 35 years in the city of London on the side of investment banks and around half a dozen mining corporates, within which he has fulfilled roles as an independent director.
In the mid-teens (2015-16), Strauss began thinking about a platform structure to mitigate risk and improve output for the mining industry. By 2020, he was being encouraged by leaders within the mining capital markets space – such as Evy Hambro, head of the world’s largest active mining fund at BlackRock and Mike Barton at Orion Resource Partners – to come up with an ESG disclosure solution for the sector, with the ambition being to improve credibility and better balance the narrative on how the sector relates to wider society.
“The initiation came from leading stakeholders in the industry who wanted to see standardisation and mining companies across the spectrum embracing ESG while being able to easily disclose their credentials and therefore be rewarded by it,” Strauss explains.
From these key principles, Strauss and his embryonic team began developing an ESG evaluation platform for the mining sector. Today, the London-based company provides thousands of quality data points for all industry stakeholders, with the Digbee ESG disclosure platform at the centre of its offering to the market.
Strauss declares that the all-encompassing platform, launched in January 2021, addresses the confusion mining corporates feel when trying to disclose their ESG credentials, while addressing the wider lack of credibility in mining with regards to sustainability. It also addresses the means for all stakeholders to analyse and plausibly track ESG performances and provides an opportunity for users to communicate their current successes and future targets to their stakeholders.
Digbee’s founder and CEO emphasises that this is not a new ESG standard, but an alignment to over 30 existing global initiatives and reporting frameworks from the likes of ICMM, IFC, SASB, GRI, the World Gold Council and more.
“In terms of a flow chart as to how the service works, Digbee encourages any mining company to register onto the Digbee platform for free. They then get access to the right-sized and future-looking frameworks for exploration, development and production depending on where they sit in the project cycle.”
At this stage, companies can get access to any of the frameworks for free, which provide a blueprint for disclosing ESG in a uniform way. Before submitting their assessment for an independent review, it must be signed off by an appointed person from the board of directors. This has the effect of raising responsibility to the senior leadership level as required under the Paris Accord and now expected under Corporate Governance Principles.
The submission, along with the evidence and narrative supporting the answers, are then assessed by a team of independent ESG experts who are selected based on their relevance to the projects. The result is a corporate-paid Digbee ESG report, which provides a comprehensive narrative and score feedback, giving management and boards the ability to remediate threats yet promote positive aspects of the project/company.
The strengths and weaknesses highlighted in the report will inform the main avenues of discussion in a debrief session between the independent assessors and senior representatives from the mining company. Following the debrief, the core scores and narrative will be published onto Digbee’s platform, although scores can be hidden by the company in the first 12 months to encourage the all-important ‘direction of travel’ which is required by fund managers and others.
Digbee will then provide the company with a communication package incorporating a shareable ESG accredited certificate that can even be included in blockchain technology as and when it is rolled out across the industry to prove provenance of underlying ore in the move to responsible sourcing.
Starting an ESG journey
“Once they’ve received an independent assessment and certificate, the company can take action on areas of remediation over the next 12 months or longer. Equally, they can promote the positive findings in an effort to improve the narrative within the sector. This is a journey. It’s neither an audit nor a pass/fail test,” Strauss stresses.
He goes on to say: “The sector has been in a constant state of improvement over the past two decades and yet it has failed to communicate this effectively, there is much that still needs to be done but a more balanced narrative is a critically important step forward.
“This platform essentially allows users to take action where necessary and have a means to communicate their journey to all stakeholders and engage with them, whether they be local people, NGOs, governments or capital providers who they might want to highlight their work to.”
Every single client has reported high levels of satisfaction during the first 12 months of the ESG disclosure being in operation, according to Strauss, with most participants admitting they didn’t score as highly as they hoped but were already putting plans in place to improve their score ahead of another assessment in a years’ time.
Digbee has also been looking at ways of improving its product offering, particularly in terms of being able to provide a uniform ESG disclosure service across the entire mining ecosystem. Royalty companies, for instance, have struggled to disclose a credible and comprehensive ESG footprint that covers the assets that make up their income and valuation.
Looking to solve this royalty conundrum, Digbee is working closely with the sector to conclude a solution and to ensure royalty companies can present themselves as sustainable partners to mine development.
Harnessing sustainability-linked bonds
Digbee is also working with a number of banks in order to understand exactly what will be required in order for the mining industry to unlock the huge potential from the burgeoning sustainability linked bonds space.
The end of last year saw gold mining giant Newmont hit the headlines with the sale of $1 billion of sustainability-linked bonds. The financing will give it a fiscal incentive to cut emissions and improve corporate governance, in a milestone transaction for the global mining sector.
Prior to Newmont’s financing, the industry had only raised $4 billion in green or labelled bonds. This pales in comparison to the $1 trillion worth of green/sustainability-linked bonds issued around the world in 2021 alone.
“The mining industry is critical to the world’s transition to a sustainable future,” Strauss says. “It’s also making a deep effort to become more sustainable and is focusing on communicating that more effectively to society as a whole. We need to be able to get the mining industry full access to the green bond or labelled bond market.”
He refers to the myriad green projects happening within mining projects. “A company might want to build a renewable energy project within its property to supply the mine and its community with clean energy. Or it might want to have an electric fleet or to economically regenerate closed/distressed mine sites, like Bunker Hill Mining did. There’s no reason why the industry can’t leverage these developments to gain access to lower cost ‘green’ debt.”
Digbee’s independent assessment and the forward-looking structure of questions in Digbee’s disclosure service could play a crucial role in compelling creditors to provide green bonds to corporate players using the ESG platform. Watch this space.
As a prominent player in the mining ESG space, Strauss is well positioned to comment on the key trends that will develop during the course of 2022. The CEO foresees increasing discussions around the broader ESG spectrum, after somewhat of an over-focus on reducing carbon emissions in recent years.
“That’s not to say global warming won’t remain a primary focus, but ESG covers 35 different topics and management from participating firms would need to disclose on all of those topics in order to fully plan for a sustainable future.”
Another emerging trend centres on the quality of the underlying data in ESG reporting. This is important because a lot of data delivered to ESG or sustainability funds is still derived from generic, backward-looking assessment metrics, according to Strauss.
“The focus now is very much on quality of data so that funds can begin to differentiate between themselves, and so that credible ESG can be tracked and therefore improve the performance of that fund through those underlying asset owners.
“Digbee fits nicely within those two because it does cover the whole ESG spectrum, it’s future-looking, it addresses greenwash and is nuanced with regards to the mining space, operating on a context-driven, mine-by-mine basis.”
A solution to the credibility issue
The mining industry has demonstrated in the last two decades that it is no stranger to operating sustainably. The problem herein lies with its damaged reputation and continuing lack of recognition for positive accomplishments amongst civil society and in the investment world. Digbee provides a solution to this credibility issue with its independent ESG disclosure service.
“Independent assessment allows for a context-driven approach to develop around a particular project and corporate structure, with feedback provided in terms of a gap analysis on a year-by-year basis.
“That will allow credibility and confidence to gain and trust to be gathered which will then allow new pools of capital to come into the mining sector, but also for society – which needs mining already – to more transparently engage and ultimately raise its confidence in the sector.
“We’re always going to be digging holes in the ground, but what we can do is explain and communicate the good things we are doing, to adapt our operations to become more sustainable and improve our credibility through earning trust,” Strauss concludes.