Resource stocks and ESG considerations
Environmental, social and corporate governance (ESG) risks can have a more dramatic impact on stocks in the resources sector than in other sectors. However, despite high profile environmental disasters, like the Ok Tedi mine in Papua New Guinea or the oil spill in the Gulf of Mexico, a broad range of ESG risks can have less publicised, but material implications for long term company performance. Some of these ESG considerations include:
- Environmental – treatment and disposal of toxic and material waste, management of other pollutants, land reclamation, biodiversity impacts, water, and greenhouse gas emissions.
- Social - community relations, employee and community safety and public health risks, and indigenous rights.
- Governance – sovereign risks, bribery and corruption, complexity from operating in a variety of jurisdictions or across resource types, and accurate and timely resource reporting.
Perpetual’s resources team, which includes one portfolio manager and two analysts, have long considered these risks as a natural part of investing in resource stocks. As ex-miners and geologists, the team bring practical experience to their investment decision making, and know that poor management of ESG risks can cost both money and lives.
In order to be more transparent about how the resources team manage these risks, we have added an appendix to our Responsible Investment (RI) policy that details our approach to considering ESG risks of resource stocks, the main issues considered and our main sources of information. The policy is available from the RI section of our website.
This information has been prepared by Perpetual Investment Management Limited (PIML) ABN 18 000 866 535, AFSL 234426. It is general information only and is not intended to provide you with financial advice or take into account your objectives, financial situation or needs. You should consider, with a financial adviser, whether the information is suitable for your circumstances. The views expressed in this article are the opinions of the author at the time of writing and do not constitute a recommendation to act. Any information referenced in the article is believed to be accurate at the time of compilation and is provided by Perpetual in good faith. To the extent permitted by law, no liability is accepted for any loss or damage as a result of any reliance on this information. No company in the Perpetual Group (Perpetual Limited ABN 86 000 431 827 and its subsidiaries) guarantees the performance of any fund or the return of an investor's capital.