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(Kitco News) - BlackRock may have been the original driving force behind ESG activist investing, putting a premium on companies that promoted strong environmental social governance policies; however, the new investment trend has grown beyond even the world's largest investment fund.
According to some portfolio managers, the mining sectors, in a bid to attract new investment and social capital, will continue to highlight their ESG policies even as BlackRock takes a step back from the trend it established.
Last month BlackRock's CEO, Larry Fink, said that he will stop using the term ESG because it has become too political.
"I don't use the word ESG anymore, because it's been entirely weaponized... by the far left and weaponized by the far right," Fink said.
It also appears that the investment firm with assets under management of nearly $9 trillion is taking further steps to distance itself from its climate change crusade as it added Amin Nasser, the C.E.O. of Saudi Arabia's oil company Aramco, to its board.
While a shift in BlackRock's activist investing could create new opportunities for perceived dirtier industries like mining, some investment funds don't expect this to have much impact on the mining sector.
Analysts have said that ESG policies are more than lip service to attract capital for the mining sector. Miners have solid environmental and community plans to have the social license to operate.
"You need your social license to operate within a community effectively. Getting ESG right takes time and dedication, though, and that's the hurdle," said Ralph Aldis, senior gold portfolio manager at U.S. Global Investors. "I don't believe Blackrock's dropping of the ESG acronym changes anything for the mining sector, as addressing these key issues is essential for fully understanding the investment risks that could impact the outcome of your investment."
Along with a social license to operate, some funds see mining companies with strong ESG principles trading at a premium in the market.
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In 2021, Sweden-based AuAg Funds, a firm focused on precious metals and clean energy, launched Europe's first ESG-focused gold mining ETF. Eric Strand, manager of the AuAg ESG Gold Mining UCITS ETF (ESGO), noted that the growing focus on decarbonization and the global target of net-zero emissions by 2050 has put a bright spotlight on the mining sector.
He explained that the world can't meet its goals or produce green energy without more critical metals.
"Without precious metals, copper, lithium and many more metals, there will be no green world. We just have to mine them better and better," he said. "Mining has never been as good as now and it is getting better all the time."
ESGO tracks the Solactive Global Gold Mining Index (SOLESGON), which provides equal-weighted exposure to the 25 gold mining stocks with the best-in-class ESG risk scores.
Tom Bailey, Head of ETF Research at HANetf, an ETF management firm that helps to manage ESGO, said the ETF's growth in the last two years shows healthy investor interest in responsible mining. He noted that the assets under management in the ETF have grown to more than $37 million.
"While some of the world's biggest asset managers appear to be backing away from the use of the phrase ESG seemingly due to growing politicization around the acronym, we believe the ESG framework still has validity," said Bailey. "ESG is about attempting to reduce risk through underweighting or excluding exposure to companies that are potentially troubling on the basis of environmental concerns, social responsibility or governance."
