The importance of ESG ratings in Africa's 2021 mining industry

by Ina King (Potgieter) October 28, 2021

A central topic in the mining industry this year has been the importance of mining companies’ Environmental, Social and Governance (ESG) ratings.

According to the PWC Annual Review of the Top 40 Mining companies, companies with higher ESG ratings outperformed the broader, global market, even with the COVID-19 crisis looming.

Investing in transformative technologies increases profits & ESG ratings

According to an article from White & Case, COVID-19 has accelerated the pace of mining technologies’ innovation, which are swiftly becoming available to the African mining industry. This delivers increased productivity and opportunity for growth, while improving both efficiency and safety in mines.

As this digital revolution is embraced on a global scale, the African market has various opportunities to capitalise on, as resources that were previously unaffordable/impossible to access are becoming more available.

The kicker here is that these transformative technologies will not only increase African mining companies’ profits but will also enable better ESG performance.

The great shift to net-zero

PwC’s annual survey also indicated that coal production fell by 12% in 2020, while deals dropped from 5 in 2018, to zero in 2019 and 2020. This emphasises the sector’s sustained pivoting to net-zero.

Additionally, the demand for minerals used in clean energy technologies is predicted to increase six-fold within the next 20 years.

Resilience & agility during the COVID-19 pandemic

PwC Africa mining leader, Andries Rossouw, commented on the annual report: “The global mining sector has demonstrated both resilience and agility in adapting its operations during the pandemic. Coupled with this, the drive towards environmental sustainability has created a volatile landscape for mining companies, but is also presenting an opportunity for genuine, transformational change.”

“The past year has demonstrated how putting ESG at the core of a strategy is crucial for delivering growth. Looking forward, it’s clear that investors in this sector will continue to be increasingly drawn to companies that actively embrace ESG policies.”

ESG is now a necessity in the mining industry

Mining Review Africa recently highlighted how numerous global investment giants have consistently stated the importance of companies performing well in ESG, in order to draw investment. Furthermore, the 2021 African Mining Indaba opened with panel discussions on ESG, highlighting it as a priority for the industry.

ESG now needs to be central to a mining company’s risk management/due diligence processes. Any and every business operating in the mining industry needs to align its strategic and operational priorities with ESG demands as public scrutiny and regulatory requirements grow.