Mixed performance across sector, with carbon-intensive aluminium firms facing biggest challenges.
Over three quarters of the world’s major metal and mining firms could be putting Paris climate goals at risk by failing to cut the carbon emissions needed to limit global warming.
According to a new report by Bloomberg Intelligence (BI), while a number of metal and mining companies have set carbon-reduction goals in the past few years, most fall short of the cuts needed to limit warming to two degrees in line with the 2015 Paris climate agreement.
The report found that only 11 of 46 metal and mining firms, including Fortescue Metals, Boliden, Anglo American and goldminer Newmont, have set the necessary targets.
According to BI, aluminium companies need to reduce emissions 49% by 2030 while other diversified and precious metal miners need a 20% cutback.
Base-metal peers setting carbon targets could reduce emissions intensity on average 20% by 2030.
Only six of the 29 base-metal peers followed by BI such as BHP have suitable targets in place with Australia-based Fortescue being the only miner to target carbon neutrality by 2030. It will also incorporate this into its remuneration structure. This week, BHP said it is considering the sale of its oil and gas business as part of a strategic review.
BI used its Carbon Scores system to determine the performance of the companies and help investors understand those that are most likely to meet Paris requirements.
The score assesses reduction trends, current and future CO2 intensity, planned cuts and positioning versus a temperature-aligned benchmark calculated using the International Energy Agency’s (IEA) Net-Zero by 2050 and Sustainable Development Scenario, which are aligned with limiting climate warming to well below two degrees Celsius.
Aluminium among laggards; gold’s report card mixed
BI looked at current performance by measuring reductions in operational carbon intensity (tonnes of CO2e/sales) over five years and existing carbon intensity and forecasts based on reported greenhouse gas reduction strategies and measures.
It found that Anglo American-owned Kumba and Boliden had recorded an over 30% reduction in operational carbon intensity in the last five years.
The report however found that no aluminium companies were close to achieving the reductions needed despite having the highest risk due to the carbon intensity in their operations. It pointed out Hindalco as being a ‘relative laggard’ and Rusal as having weak reduction goals.
This is concerning given that among metals and mining peers, aluminium producers are most exposed to carbon costs. These could reach 1.3% of Ebitda to 2024 under Europe’s emissions trading system. Carbon prices crossed €50 euros per ton in May and may rise more with the EU’s new ‘Fit for 55’ reforms.
Gold miners are also struggling with only 6 of 17 companies setting carbon-reduction targets as of 1 April this year, including Kirkland Lake Gold, Newcrest Mining and Newmont.
“Though few gold miners set carbon-reduction targets, those that did have ambitious goals in place, with all but one meeting IEA’s Net Zero Emissions and Sustainable Development scenario,” said Shaheen Contractor, ESG Analyst at BI. “Anglo American Platinum, Barrick, Newcrest, Newmont and Kirkland Lake all exceed the 2030 threshold, and set carbon-neutral goals beyond 2030, suggesting a positive long-term transition outlook.”
Although Polymetal International was targeting a reduction of 3% at the time of the analysis, the firm committed to a 30% cut in GHGs by 2030 on April 27.
Sector under scrutiny across E, S and G
As well as environmental failings, metal and mining companies have been in the crosshairs of criticism on their social and governance activities.
This includes the chief executive of mining giant Rio Tinto quitting last September after the firm’s destruction of Aboriginal caves in Australia. Jean-Sebastian Jacques stepped down after the group blew up two Aboriginal rock shelters at Juukan Gorge.
The caves showed 46,000 years of human habitation including artefacts such as plaited human hair.
Rival miner BHP is facing a US$7 billion lawsuit by 200,000 claimants after a dam rupture in 2015 in Brazil killed 19 people.
In addition, also in Brazil, in 2019 the Brumadinho tailings dam disaster occurred in which nearly 10 million cubic metres of iron ore tailings were released by a mudflow killing 270 people. The dam was owned by Vale, which earlier this year agreed to pay US$7 billion in compensation.
Investors have responded to the economic, social and reputational cost of these disasters. Earlier this year, the Church of England Pensions Board and Swedish Council of Ethics committed to new measures to improve safety in the mining sector.
New ambitions include the establishment of an independent global institute by end of 2021, and an expectation that mining companies will confirm their adoption of the Global Industry Standard on Tailings Management, published in August 2020, and disclose a compliance timeline.
Miners are also making in-house changes with, according to recent research from Baker Steel Capital Managers, 75% having a dedicated Sustainability Committee, 80% having a water efficiency policy and 90% having Ethics & Human Rights policies.
This article was updated on August 17 to reflect Polymetal’s updated commitment, which was not included in the original article.
