Quick Wins, Goldmines, and Moonshots: Reinventing Alberta’s Energy Sector
May 26th, 2022 | Dale Beugin, Jamie Bonham, Alicia Planincic
When one imagines a world powered by renewable energy, it’s often a landscape of rolling hills topped by whirling wind turbines—not an open-pit mine hundreds of meters deep and a kilometer across. Yet the hard truth is, the former is not currently possible without the latter. Experts warn that if we go full speed ahead into a renewable energy transition without considering the impact of mining the required materials, we may do more harm than good.
This immense shift brings with it a sizable opportunity. The demand from automakers, technology companies and energy providers has the potential to generate long-term profit for investors and transform mining into a more responsible, sustainable industry.
In this conversation between Aimee Boulanger, Executive Director of the not-for-profit Initiative for Responsible Mining Assurance (IRMA), and Jamie Bonham, Director of Corporate Engagement at NEI Investments and IRMA board member, we discuss how the IRMA standard can be a lever to drive change in the industry and the investor role in encouraging companies to participate.
JB: The energy transition is bringing new focus on mining, whether investors have direct exposure to miners or indirect via the companies driving the transition. What are some of the key areas for improvement in the industry?
AB: While the global focus on mining and material sourcing may be unprecedented, the challenges facing the mining sector have remained essentially unchanged. Additionally, while there is a focus on reducing greenhouse gas emissions across supply chains—and this is important to pursue in the mining sector—carbon emissions are not mining’s greatest risk. Grave concerns around water quality and quantity, community displacement, human rights violations, loss of biodiversity, unfair labour practices, loss of cultural heritage, and lack of transparency in the name of mineral security, among other issues, have come to the fore.
JB: I feel like ESG investors knew these issues were prevalent ages ago. What are some of the reasons they are still occurring?
AB: A range of events—from tailings dam failures, to community protests, to mine worker deaths—have periodically served as wake-up calls, but frankly the world often hits the snooze button after short-lived, largely ineffective mitigation efforts.
There is a better way. If we evaluate existing mining practices against a robust definition of best practice, we can understand the gaps between the two. We need to look at a mine site holistically—stakeholder engagement, governance, emergency preparedness, plans to protect community health, management of environmental impacts and so on—in order to fully assess the opportunities and risks.
The renewable energy transition will likely focus global markets’ attention on mineral sourcing for decades to come. Their sustained attention will create the ongoing demand for more responsible practices necessary to prevent governments and the mining sector from dozing off again. It also creates profit opportunity for investors.
JB: How does IRMA fit into this picture, and what are some of its benefits?
AB: IRMA sets rigorous requirements on every ESG aspect relevant to the mining industry. Mine sites begin with a self-assessment and very often make changes after comparing their practices with ours.
When a mine site is ready, they hire auditors trained and approved by IRMA to independently assess their site and publish an audit report detailing their performance in every area. This transparent, public report is key to driving improvement, as the mine site is then accountable to communities, customers and other stakeholders to adjust practices and improve over time.
There are several certification systems for mined materials in existence. As an investor, is there anything that stands out about IRMA to you?
JB: Essentially, an IRMA-audited mine is going to answer any ESG-related question I might have. Following the existing industry-led responsible mining frameworks is largely a no-regrets decision, but it won’t bring the certainty investors are looking for. The rigour and credibility of the IRMA standard brings an unprecedented level of detail; there is a transparency to the audit that provides very granular ESG performance data.
Three key differentiators are:
- Equal governing authority. Multi-stakeholder consultation is a facet of many certifications, but IRMA’s core governance characteristic is one where those stakeholders have equal governance over the standard, not just industry.
- Rigour. The governance structure leads to a standard that is truly world class, whether it is looking at impacts on water, respecting human rights or seeking free, prior and informed consent of Indigenous communities.
- Third party certified. It is in the name! Assurance by accredited third parties brings unmatched credibility and, well, assurance.
AB: Can you share an example where these differences are apparent to investors?
JB: The transparency of the audit process and the unique focus and inclusion of workers and affected community voices brings value to investors. But from an impact perspective, the act of auditing a mine can itself lead to real on-the-ground change. Like at the Carrizal lead-zinc mine in Mexico. That mine is operated by a relatively small company and has provided decades of jobs but also the impacts of extraction.
The company used an IRMA audit to understand where global best practice exceeded national regulations. For example, IRMA’s requirements on worker representation are more comprehensive and robust than what is required in Mexican law. These practices were not previously identified as priorities for Carrizal because they were not legal requirements. For smaller companies, where cash flow can prevent simultaneous progress on all issues, the audit results will help leadership prioritize where to focus—whether it be on requirements deemed most critical in the IRMA Standard or by consulting workers and community stakeholders to first address the issues they view as most pressing.
AB: How can investors drive the adoption and growth of IRMA?
JB: Start with learning more about IRMA. Go to the website, get the newsletter, talk to a board member (like me) or reach out to the team directly. Compare it with other certifications and see if it resonates. If it does, engage with the mining companies in your portfolio to encourage them to assess against the standard. Talk with the end-users of minerals to ask how they are ensuring that materials in their supply chain are responsibly mined. Push them to set expectations for IRMA certification in their supply chain.
In the end, investors need to be vocal about the importance of responsible mining—to governments, to mining companies, to the industries driving the demand for minerals. If investors can make that expectation clear, and sustain it, the value of a standard like IRMA will be evident.
RIA Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not necessarily reflect the view or position of the Responsible Investment Association (RIA). The RIA does not endorse, recommend, or guarantee any of the claims made by the authors. This article is intended as general information and not investment advice. We recommend consulting with a qualified advisor or investment professional prior to making any investment or investment-related decision.
Author
Jamie Bonham
Director Corporate Engagement
NEI Investments
Aimee Boulanger
Executive Director
Initiative for Responsible Mining Assurance (IRMA)
