How considered investment can champion positive change in the mining sector
Adam Matthews, Chief Responsible Investment Officer for the Church of England Pensions Board and Chair of the Global Investor Commission on Mining 2030, joins Mining & Minerals Today to discuss ethical investing and making a positive impact on the industry.
“I didn’t follow a particularly traditional path into finance, having previously worked in politics,” Adam begins. “Following university, I ran a member of parliament’s office, supporting his select committee and policy development work. Through that, I became involved in establishing an organization that was working across central West Africa focused on food and wildlife sustainability. That then led to working on issues of sustainable development across the G7 and ultimately the G20 and nine years ago, I began working for the Church of England. Initially, I was responsible for the development of the ethical investment policies for the Church’s three separate investing bodies. At that time, I was Secretary of the Ethical Investment Advisory Group and in that capacity, had to complete the climate change policy for the investor bodies. There are three separate bodies, which collectively manage approximately 18 billion pounds in assets.
“The Pensions Board is the smaller of the three, but a very active and growing diversified fund with a clear strategy to work with other investors on issues of systemic importance. I am the Chief Responsible Investment Officer and co-lead the investment team with the Chief Investment Officer. As a faith-based and ethical investor, when we look at a complex sector such as mining, in many respects, it poses considerable challenges for a fund, such as the Pensions Board. However, in developing our investment and stewardship approach we undertake extensive stakeholder engagement. We try to understand the challenges, and then how we can interact with them. Walking away was not an option for us, because we recognize the importance of mining to society and to many countries’ development. In developing an ethical approach, we can draw from the various references to mining in the Bible as well as the wider teaching of the Church. Through a process involving leading ethical thinkers, former Vice President of the World Bank, theologians, trustees and our own investment teams we were able to draw several key principles that shape an ethical investment policy for the extractive sector. I’ve been implementing the policy ever since. We’ve been leading several interventions on behalf of the wider investor community in response to challenging issues in the mining sector. We recognize the importance of mining and its presence in many of the areas where faith communities are also present, alongside the fact that society demands these resources. Equally, we recognize that when mining goes wrong, it can have very outsized impacts on communities, on people, and on the environment. Hence our long-term commitment to drive genuine systemic change. The intervention we made following the Brumadinho disaster and those underway with the Global Investor Commission on Mining 2030 are intended to address challenges in a meaningful way,” he explains.
The Global Investor Commission on Mining 2030 is a collaborative investor-led initiative. It recognizes the mining industry’s important role in the transition to a low carbon economy, and considers key systemic issues faced by the mining sector that currently challenge, or could challenge, existing good practice and the sector’s social license to operate. The aim of the commission is to develop a global consensus across the finance and corporate world for a vision of a socially responsible mining sector by 2030 that meets the needs of society and the low carbon transition, and does not cause harm to people, communities or the environment. The global multi stakeholder commission commences its work at the end of September 2023 and will be operating for 18 months. There will be a particular focus on the relationship between extraction and conflict.
“I think we can already identify what is good,” Adam continues, “and there are clear efforts underway to cement best practice standards. What we need to establish is the vision for socially responsible mining and how we, as investors and the wider finance sector, play a constructive role in enabling it, particularly recognizing that there’s enormous pressure for growth in extraction, but that there seems to be a disconnect between the way many of us value those companies operating in the sector. One crucial take-out from my recent visits to South Africa is recognizing the relationship between extraction and conflict. As investors, we need to engage with that reality much more, and have a concerted approach to ensuring that companies are positive actors in areas where there’s weaker governance or where there are challenging issues that could lead to conflict.”
From electric car batteries to renewable energy production, the transition to a net-zero global economy requires low-carbon solutions that are mineral-intensive. In short, the global extraction capacity will determine whether the goals of the Paris Agreement can be achieved. That said, this demand must be delivered sustainably and responsibly, and the mining industry as a whole sector, and despite good practice in many companies, currently faces several social and environmental issues such as climate change, biodiversity impacts and child labor. Addressing these issues requires systemic, long-term engagement from investors to work collaboratively with industry and other stakeholders to drive change, support best practice in companies, address issues through value chains and ensure accountability and transparency.
“Historically, the wider investor community only really engaged with the sector through a negative prism as a result of disasters or if something went wrong. Consequently, I feel that we significantly undervalue best practice, and don’t make it easy for companies to walk that path. Equally challenging is how the sector is going to respond in relation to the low carbon transition and what the role of investors in that context will be. I don’t think many investors really understand the correlation between extraction and conflict and the value they can add by working with companies to ensure they are positive actors that strengthen local dynamics and bring a beneficial presence. In some instances, there are real imbalances of power when a mining company goes into an area. Even a company with the best intentions can completely destabilize local realities.
“There are quite clearly lots of committed individuals and leaders, alongside good practice, within the mining sector. The challenge is that when something goes wrong, the whole sector is impacted. As such, you can’t isolate yourself from a disaster that may happen at a competing company. Standards need to be consolidated and investors need to be very clearly aligned behind that consolidation rather than proliferating additional ESG requests and asks. There needs to be a frank discussion with companies around the ways that we incentivize the most socially responsible approach to mining, while being alert to the likelihood that future demand will further drive potential conflict.
“In terms of tailings dams, for example, there wasn’t a global standard but there is now. The commission builds on the experience of the investor led response following the Brumadinho dam disaster. This response has led to company disclosures of their facilities, a global standard developed together with industry and the UN, and we are close to the formation of an independent global institute to support the auditing of individual mines and their adherence to that standard.
“We are seeing practical evidence of operational change but that can always be improved upon,” Adam emphasizes. “I met with several communities across southern Africa and, one message about the transition that really came across was that when we look back in ten years’ time, we want to see a legacy of positive impact on those communities and environments rather than a negative one riven with conflict. Many of those communities are not necessarily opposed to the presence of extraction and we need to work hard to achieve a positive and welcome impact.
“I’m encouraged by the companies with which I interact,” Adam concludes. “Change is always difficult, but we can achieve more engagement by having clarity around that socially responsible vision, and then enabling finance to play a supportive and constructive role. It’s important that we don’t just wait for regulation, we can always strive to advance best practice and work towards achieving socially responsible mining. That is how companies, and the industry, will secure their social license, and investors are key to this.”