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Digging Deep on Mining Decarbonization in Glasgow

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The mining and metals industry, which will be critical to the transition to a low-carbon economy, is facing a pivotal moment of opportunities and challenges. While companies ramp up production of key transition metals from cobalt and copper to nickel - important for electric batteries, for instance – they’re also needing to decarbonize their own industry.

That was the crux of a lively discussion that took place during the 2021 Sustainable Innovation Forum, which occurred alongside COP26 global climate conference. The panel, Digging Deep for Decarbonization: Mining and Minerals, featured Jonathan Hackett, Head of Sustainable Finance at BMO Capital Markets and Rohitesh Dhawan, President and CEO of the International Council on Mining and Metals and was moderated by Maithreyi Seetharaman, founder of Facultas Media.

“If we think about the materials that are needed for decarbonization across the world, so much of what we talk about is pulled from the earth,” Jonathan Hackett said to launch the conversation on how minerals and mining fit into global efforts to fight climate change.

Rohitesh Dhawan pointed out that the International Council on Mining and Metals (ICMM) has committed to net zero scope one and scope two greenhouse gas (GHG) emissions by 2050. That covers GHGs produced by sources the mining operation owns or from the generation of purchased electricity, heating and cooling used by miners.

The big challenge is around scope three emissions, however, which are indirect emissions related to the company’s value chain. These can include waste disposal, transportation and employee commuting. The ICMM has committed to accelerating action on scope three emissions, including setting scope three targets, if not by the end of 2023, as soon as possible. Dhawan suggested companies should be reporting their scope three emissions as soon as possible because you have to know what GHGs are being produced if you’re going to start cutting them back. 

That’s hard for many companies to do, however.

“I think the heart of why we all find it difficult to wrap our arms around scope three is because we tend to conflate responsibility with accountability,” he said. Responsibility is voluntary and proactive – when a miner recognizes they need to help lower emissions further along the supply chain, even though they’re not personally accountable for them. That differs from accountability, which is following through on what is in your direct control.

That responsibility is part of why decarbonization is a core component of a miner’s ESG strategy, says Hackett. Companies are looking for ways to differentiate themselves, and while reducing primary emissions is one part of the equation, the other is ensuring that the resources provided for a final product help lower its overall emissions profile.

“The ability to affirmatively say, ‘I've reduced the emissions, I've done everything I can, this is a responsible product, makes a very large difference, in terms of the ESG risk and ESG opportunity for those companies,” said Hackett.

ESG versus SDG

As noted by panel moderator Maithreyi Seetharaman, mining isn’t going anywhere – the world will continue to need these metals. That means that mining companies must pursue decarbonization, but do it in a way that still protects the communities in which they mine.

“The welfare of people and ecosystems can never be considered collateral damage in the transition,” Dhawan noted. “We would be foolish to pursue this transition single-mindedly and do it in a way that harms people and ecosystems in the process.”

Given that decarbonization touches every one of the UN’s 17 Sustainable Development Goals, he suggested mining companies and their investors should reframe ESG requirements to encompass SDGs as well. In fact, the ICMM is leading the way on biodiversity in nature, having committed to not prospecting or developing new mines at any UNESCO World Heritage sites in the world. They’re also putting pressure on governments to pass laws preventing any mining companies – not just ICMM members – from mining at UNESCO sites.

Ultimately, mining companies are transitioning to more responsible practices, even at the exploration phase, and doing their best to communicate that to investors. Said Hackett: “As long as investors are looking at that stage and those earlier producers are thinking, ‘How do I communicate what I'm doing now that sets me up for success and for responsibility later?’ We're able to close the loop.”

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Jonathan Hackett Co-Head, BMO Energy Transition and Head, Sustainable Finance


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