LatAm miners urged to step up climate action

Latin America’s mining sector will need to up its game to deliver on climate change goals being demanded by investors, according to experts.

While the industry has begun taking steps to cut carbon emissions, further action and coordination will be required if it is to align with the tougher Paris Agreement goal of limiting global warming to 1.5C.

Companies risk losing out on investment if they fail to adequately decarbonize their operations, analysts warned.

GOLD STANDARD

In the gold space, producers are broadly in line to meet the weaker Paris Agreement aim of limiting global warming to below 2.0C, according to an analysis by consultancy Wood Mackenzie.

The goal will be met through a combination of previously announced actions and changes in the asset mix (shifting toward new, lower emitting operations), energy efficiency improvements and lower emissions from grid power.

But bolder steps – and a coordinated approach - are needed to meet the tougher 1.5C goal, according to the research, based on 339 large gold mines accounting for 60% of total gold mine supply, with scope 1 and 2 emissions of 55Mt in 2019.

“The focus on carbon emissions in the gold sector is here to stay,” Rory Townsend, Wood Mackenzie’s head of gold research, said.

“While cleaner energy projects are coming thick and fast, the bulk of progress so far has come from 15 companies,” said Townsend.

“To change the perception of the industry, however, it needs to be a collective effort,” he added.

Other experts agree that while the gold sector appears well placed to align with the 2.0C target, additional action will be needed to meet the 1.5C goal.

“It needs a bit more ambitious action, specifically in terms of the use of renewables, to be confident to meet the 1.5C target,” John Mulligan, World Gold Council climate change lead, told BNamericas in May.

Peru and Mexico are among the world’s top 10 gold producers.

COLLECTIVE APPROACH?

Others agree that a collective approach to climate change is lacking across the mining industry, and not just gold.

“Generally speaking mining companies are setting up goals and taking actions to reduce carbon emissions, but not on a coordinated basis yet,” Juan Esteban Fuentes, head of South America consulting at UK-based consultancy CRU told BNamericas.

Mining companies in Chile, for example, have stated their emissions targets but these differ in terms of percentage cuts and timing, Fuentes said.

RISK OF INACTION

The risk of inaction is not just one of public perception, but also the potential loss of access to capital.

“Miners who are not striving to reduce their environmental footprints are likely to lose favor among investors and struggle to secure project financing,” said Townsend.

Several miners have executed sustainability-linked credit facilities, including Newmont, LatAm’s top gold producer, he said.

On Wednesday, the company published a first climate strategy report, including 2030 targets of a 32% reduction for scope 1 and 2 emissions and 30% for scope 3 (value chain) emissions.

Climate change action – and the overall environmental, social and governance (ESG) push – is being driven by investors, Fitch Ratings analyst Joe Bormann recently told BNamericas, with sustainability-linked bonds proving popular among companies.

“A lot of companies like to have a bond option, like a sustainability-linked bond or some other ESG-linked bond, because then it brings a different investor group as a lender to them,” he said.

Investors will often buy more bonds when they see a company is committed to address ESG issues.

“It’s becoming nearly impossible for corporates to ignore the ESG issue because it’s an issue that investors continue to talk about, and want more and more information,” said Bormann.