Investors Call For Mining Companies To Address Climate Risks

A group of shareholders called the ‘Aiming for A’ investor coalition is asking three giant mining companies to be more transparent about the climate change risks to their businesses. The investors are responsible for over $8 trillion in assets.

Shareholder resolutions to Anglo American, Glencore and Rio Tinto include support from four of the world’s largest pension funds. All three resolutions are identical and call for the companies to include the following in their routine annual reporting from 2017:

• Further information about ongoing operational emissions management
• Asset portfolio resilience to the International Energy Agency’s scenarios
• Low-carbon energy research and development (R&D) and investment strategies
• Relevant strategic key performance indicators (KPIs) and executive incentives
• Public policy positions relating to climate change

“It is our intention that this is a supportive but stretching shareholder resolution,” the coalition declared. The text mentions two similar Aiming for A resolutions last year that were approved by BP and Royal Dutch Shell.

Climate-change risks to the mining sector are significant

The mining sector faces significant climate change risks in its supply chain, a report by the International Committee on Mining and Metals (ICMM) details.

The physical risks to mining operations occur “because these industries are often located in challenging geographies, rely on fixed assets with long lifetimes, involve global supply chains, manage,” the report's authors state. These physical risks include changes to rainfall, higher sea levels, and lower freshwater lake or river levels. Physical risks may impact asset values, reduce efficiency, increase the risks of not complying with regulations, force changes in operating practices, and reduce or increase demand for certain products or services.

Mining companies already operate in areas that experience weather extremes, but as the climate changes they will need to cope with even more physical risks to their operations. There are certain characteristics of the mining sector that may increase exposure to climate risks -- namely a reliance on “large fixed assets with long design lifetimes,” which means that potential climate impacts need to “considered at the outset,” the ICMM report cites. Otherwise, designing and planning decisions may not be resilient and could increase risks to operations and even the local environment.

The ICCM report points out two key areas where the mining sector is vulnerable. One of those areas is water: Water is needed for mining, so any climate-related impacts on water -- such as changes to rainfall and depleting freshwater reserves -- will directly impact mining operations. And in areas where water resources are already under stress, additional stress brought on by a warming planet will only increase risks to operations. 

Energy is the other key area of vulnerability noted by the ICCM. It takes a lot of energy to break, move and process large amounts of ore. Here is where water and energy intersect. Hydroelectric power is deeply affected by water availability, but conventional power is also vulnerable to climate change. Transmission pathways for energy are vulnerable to disruption by extreme weather events such as storms or flooding.

Some mining companies “have already taken steps to mitigate the potential impact of the move to a low-carbon economy and lower commodity prices,” as another report, this one by Institutional Investors Group on Climate Change, states. Some examples are cited, including mining companies that are exploring the potential of new technologies such as carbon capture and storage, while others are setting goals to achieve zero-carbon mining operations.

However, the report's authors are concerned that "the current business strategies of many mining companies may not be sufficiently sustainable given the potential for rapidly changing demand for different commodities triggered by emerging technologies and policy interventions which can and will impact on the sector.” In other words, while some mining companies are addressing climate change risks, others are not.

Image credit: Wikimedia/Eickhoff