Enhancing outperformance with ESG

Analysis of company outperformance due to ESG factors reveals an alternative solution to unlocking the future value to help receive preferential green finance rates. Companies that are not improving their ESG credentials risk value destruction, in addition to missing out on the potential upsides. Additionally, rigorous academic studies have demonstrated the outperformance of companies which have successfully integrated their sector-specific material ESG risks into thoughtful company strategy.

However, not all spending on sustainable initiatives is the same. Some initiatives produce material, value-adding impacts whilst others create little value or, at worst, simply raise operational costs. The core factor determining whether ESG initiatives drive company outperformance is the initiative materiality to a specific sustainability issue. Companies with good ratings on material sustainability issues significantly outperform those with poor rankings on these issues.

At a national level, countries have subscribed to numerous international initiatives such as the UN Paris Agreement and the UN Sustainable Development Goals. As a heavy industry, mining and natural resource management play a key role in attaining these national goals, and so the sector is under increased scrutiny to play its part in providing the critical metals which are key to a sustainable and green future. Studies have also shown that company performance from ESG initiatives can be predicted by public information, and from the information reported in company sustainability reports, interviews and surveys within organisations.

Below shows a range of ESG issues we currently monitor to assist corporate strategies.

Environmental factors

• Energy use (electricity and fuel).

• Scopes 1, 2 and 3 greenhouse gas emissions.

• Water use and recycling rates.

• Rock waste and tailings impact.

• Nitrous oxides and sulphur dioxide emissions.

Social factors

• Health and safety.

• Labour diversity.

• Labour efficiencies.

• Community impacts.

• Supply chain practices.

Governance factors

• Business ethics.

• Company structure.

• Leadership diversity.

• Industry associations.

• Risk management.

• Transparency and compliance.