Gold lobbyist says global sector can bridge the ESG gap in wake of Covid-19

THE economic and social pressures of the Covid-19 pandemic have provided the world’s gold industry with a unique opportunity to respond to the question: what is the purpose of business, said Terry Heymann, CFO of the World Gold Council (WGC).

Commenting following the launch of a WGC report detailing the gold industry’s contribution to the UN’s Sustainable Development Goals, Heymann said: “The report was written before the pandemic, but it fits into the zeitgeist. It demonstrates how gold mining companies do support communities; something that hasn’t been well communicated in the past”.

Popular conscious around economic and social disparity, as well as the interplay between humanity and the environment has grown in the wake of the pandemic. There’s also the prospect of global recession, whilst China and India are expected to show negative growth. Set against this, the gold price is at elevated levels are investors adopt the metal’s value store characteristics amid central bank stimulus efforts.

The new-found popularity of gold has therefore thrown a somewhat sharper spotlight on how the industry conducts itself, especially as generalist investors, with less risk appetite than specialist funds, show an interest in owning gold or gold companies.

The WGC’s report provides case studies outlining how the gold industry has met certain environmental, sustainable and governance (ESG) standards. These standards relate to social inclusion, environmental support, and global partnership, and include the contributions of the WGC’s 28 members, many of them the world’s largest gold producers such as Newmont Mining, Barrick Gold, and AngloGold Ashanti.

But the WGC is not universally representative of the sector; and there are also limits on the extent of the social and economic good the council’s members can provide. In fact, no gold company can replace the work of a public sector institution or sustainably make up for the deficits of dysfunctional government. Heymann acknowledges this: “It’s not the role of gold miners to be a quasi-government.

“But mining companies do bring capital and build an economic stream; they have been building infrastructure.” He refers to hydro-electric power financed by partners AngloGold Ashanti and Barrick Gold at their Kibali joint venture in the Democratic Republic of Congo. The facility will be in place after Kibali is exhausted, he says.

The report also builds on its earlier contribution to the Responsible Gold Mining Principles to which the entire industry must comply, including the junior and gold exploration sector. The junior and exploration sector has fresh impetus amid elevated gold pricing and evidence of a shortage in new gold discoveries; 2019 was the first year in about ten where primary net gold production went into reverse.

Juniors and exploration firms are typically under-funded and have fallen short of their social responsibilities, but Heymann thinks that’s changed because investment principles governing primary producers has been extended upstream. “If you’re looking to on-sell an asset you need to incorporate strong ESG from the outset. It is critical to valuation and critical if you want to get funding for your project,” he says.

There are limits. About a fifth of gold production from Africa is thought to originate from illegal or artisanal mining. The WGC’s report touches on how governments are attempting to formalise and consolidate the artisanal sector, but Covid-19 has stopped or reversed economic development in some countries. Poverty drives people to illegal mining with its attendant human and environmental abuses.

“Clearly, we need government cooperation, and we need to address poverty in order to tackle illegal gold mining,” he said. “There are some interesting economic models around such as central banks in some countries buying up gold for reserve value from formalised artisanal mining without taxing it.”