There is a growing move towards more sustainable investment. Investments where factors beyond profit are given precedence – like impact on the environment and society. Can gold mining be a part of this “green investment” movement?
The basic premise behind investing is to make money. But there is a growing propensity for investors to consider more than just a company’s profitability when deciding if they will invest.
The idea of investing in companies that reflect the investor’s own values is not new. Back in the 1950s and 60s, trade union pension funds looked to invest in projects and companies that made a difference to the social conditions of workers. Fast-forward 60 years and the rise in environmental, social and governance (ESG) investing captures investor concerns about sustainability at a time when the globe is grappling with the effects of modern life on the environment, health and communities.
The result has seen investors moving away from potentially polluting enterprises, like coal-fired power, and shareholders demanding more accountabilities of the companies they support. Where does that leave gold?
The benefits of incorporating gold into a multi-asset portfolio are well documented – it’s an effective hedge against “black swan” events, helps buyers diversify risk and improve the risk-return profiles of their funds.
But there is no denying that current gold mining practices are toxic – 90% of mines globally use cyanide to extract the ore and artisanal miners still use mercury. These chemicals can have profound and lasting negative impacts on the environment and the health of workers and surrounding communities.
So it may seem contrary that gold is being included in ESG investment portfolios. There were long-held concerns over how gold was sourced and the deplorable and illegal practices that saw countless human rights abuses and armed conflicts.
To warrant inclusion in their ESG portfolios, investors demanded the gold industry provide clarity around the provenance of gold that goes into making gold bars. The industry responded with policies to identify, promote and encourage responsibly-sourced gold.
However, while these policies have a focus on ethical sourcing, they do little to address the environmental impact of gold extraction processes.
For gold to be a true ESG investment, investors must insist that the way gold is processed becomes less toxic and more environmentally sustainable.
Viable alternatives exist and they are effective. Clean Mining’s (part of Clean Earth Technologies Group) innovative technology eliminates the need for cyanide and mercury, giving miners a clear roadmap to clean, responsible and sustainable mineral processing – and attracting revenue by strengthening their ESG appeal for investors.