It has been widely acknowledged by opinion leaders that one of the pandemic’s effects has been to accelerate trends that were already underway. Of the top 10 issues affecting industries, Environmental, Social and Corporate Governance (ESG) is frequently mentioned as a major concern, and it is the “S” that has moved to center stage. While good corporate governance and environmental stewardship have long been recognized by investors, it is now all aspects of the social that will determine which companies outperform.
ESG criteria have been primarily used by socially conscious investors to evaluate whether they want to invest with a company based on these indicators, and increasingly used by financial firms and brokers to help investors avoid companies that might pose a greater financial risk due to their environmental or other practices.
While in the past ESG may have been somewhat restricted to “green bonds” and environmental issues, social principles will begin to have more representation in financial portfolios, even as that presents a challenge to financial management companies.
As an experienced practitioner of social impact and community assessment studies for mining companies, I am familiar with how this aspect has affected resource industries. But now all companies are facing more intense scrutiny partially exacerbated by the current intersection of environmental activism and social justice. How “social” is defined will become more granular and specific.
How do I think this will affect the future regulatory environment? In my opinion, I believe that we will see more requirements for environmental and social impact assessments (ESIA) and related plans in the context of granting permits and negotiating mining contracts. Based on my experience local jurisdictions will be keen to adopt such stipulations. It is a wise move for companies in our industry to prepare in a positive manner towards these requirements.
Should you have questions or require more information, please do not hesitate to contact me.