Mining firms with higher ESG ratings outperform the market
28 June 2021: Mining companies with higher ESG ratings outperformed the broader market during the peak of the COVID-19 crisis, delivering 34% average total shareholder return over the past three years — ten percentage points higher than the general market index.
The figures come from PwC’s 18th Annual Review of the Top 40 Mining companies - Mine 2021 - which examines the global trends in the mining industry. Net profit in the sector was up 15%, cash on hand rose 40%, and market capitalisation rose by nearly two-thirds to US$1.46tn.
There are further signs of optimism for 2021, with forecasts indicating that the Top 40 will report record-high revenue and EBITDA levels and the second highest net profit. Alongside this, the demand for the minerals that go into clean energy technologies is expected to increase six-fold in the next twenty years.
The survey also reveals that Top 40 coal production fell 12% in 2020. Deals fell from five in 2018 to zero in 2019 and 2020, highlighting the sector’s continued shift to net-zero.
This year, we see two Indian mining companies on the Top 40 list – Coal India Limited and Hindustan Zinc.
Tax transparency is vital to ESG
Whilst tax transparency is a fundamental way for companies to demonstrate their commitment to ESG issues, only 30% of the Top 40 embraced tax transparency reporting in 2020. The report finds that a further 39% of mining and metals company CEOs are extremely concerned about tax policy uncertainty, more than double the number last year (18%). This poses a long-term risk to the sector.
Tax transparency, a key ESG metric, gives miners the chance to highlight their significant financial contributions to their communities and the resulting improvements in education, infrastructure, and quality of life.
Yogesh Daruka, PwC India Mining & Metals leader, said: “The price recovery in the second half of the financial year provided a tailwind to the industry to improve on performance and financial parameters. Mining companies in India continued to be resilient and perform their operations, also lending a hand to government efforts in addressing the health pandemic in their regions of operations. The industry needs to invest for the future by exploring and leveraging operational technology initiatives, enhancing productivity and efficiency, and engaging with stakeholders for shared prosperity.”
Sambitosh Mohapatra, Leader – ESG, Energy Utilities & Resources, PwC India, said: “A robust financial outlook provides a unique opportunity to these companies to rethink their existing purpose and strategy, reimagine the future and set out a bold ambition as they reconfigure their business models for long-term sustainable value. Deploying appropriate technologies to measure and report sustainable initiatives will be key as stakeholders will hold them accountable for preserving and enhancing value.”
Paul Bendall, Global Leader, Mining & Metals, PwC Australia, said: “The global mining sector has demonstrated both resilience and agility in adapting its operations during the pandemic. Coupled with this, the drive towards environmental sustainability has created a volatile landscape for mining companies, but is also presenting an opportunity for genuine, transformational change.
“The past year has demonstrated how putting ESG at the core of a strategy is crucial for delivering growth. Looking forward, it’s clear that investors in this sector will continue to be increasingly drawn to companies that actively embrace ESG policies.”
Notes to editors
About the report
Mine 2021 is PwC’s 18th Annual Report on the Top 40 mining companies.
The analysis includes major companies from all parts of the world whose primary business is assessed to be mining. The results aggregated in this report have been sourced from the latest publicly available information, primarily annual reports, and financial reports available to shareholders.
The report can be read at www.pwc.com/mine.
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