August 4, 2020

The art (and science) of finding new exploration targets

In a world where plastic straws are being phased out of use, and bringing your own shopping bags

In a world where plastic straws are being phased out of use, and bringing your own shopping bags to the grocery store is becoming standard practice, it makes sense that people would want their investments to also reflect a socially and environmentally conscious stance.

That is where ESG investing comes in. ESG investments look at the long-term impact of investments on society, the environment, and what values the business puts emphasis on.

Investors have had a view shift, from seeing sustainable portfolios as something that brings lower rates of return, to the perception that investing sustainably will actually yield higher rates of return.  This is why ESG is a key concern for fund managers facing tighter restrictions on where funds can be deployed.

As the market provides more options for investors, concerns such as environmental and social impacts come into play. We are even noticing that more and more trading algorithms are taking ESG into account.

Ani Markova, an independent portfolio manager who advises the mining industry on ESG, says that there has been a “huge demand” from investors for companies with higher ESG ratings and it has affected every aspect of the capital markets, from pensions to green bonds to private equity. “We have seen a big shift in the philosophy behind financial analysis from a simple analysis of income statements and balance sheets, to now, a more complex levering of factors including the ethics of a company, the competitive advantages, and the culture, which are more intangible assets.” Markova told an audience at PDAC in March 2020.

The shift towards ESG may see some sectors, like clean energy, being favoured against others, such as the coal industry, but that doesn’t mean that companies are being forced to change their businesses completely. For example Altius Minerals is increasing their ESG disclosures and investing their coal royalty, which provides $12 to $14 million in revenue per year, into renewable energy projects. Being a responsible global citizen, and company, starts with transparency and an effort to make whatever is in one’s hands to act in an environmentally responsible way.