Environmental concerns top risk list

ESG credentials are becoming increasingly important for strong businesses.

For the first time in 12 years, environmental concern has topped KPMG’s Global Mining Outlook risk list survey, pushing commodity price uncertainty into second place.

KPMG global mining leader Trevor Hart said the result was a significant milestone for the mining sector.

“Two of the top three risks are in the environmental, social and governance (ESG) space. The result underscores the importance of the ESG agenda to the mining industry, both across the world and in Australia,” he said.

And the third top risk – community relations and social license to operate – is also related to ESG.

“Mining is typically a long-term industry yet in a very short space of time, the ‘E’ in ESG has jumped to the top of the risk top 10 and with it, the ‘S’ and the ‘G’ are also on the minds of executives and boards of the world’s leading miners,” Hart said.

He said this reflected the reframing of priorities in mining to account for climate change, decarbonisation and ESG issues – a trend seen more broadly across international business. He noted political instability/nationalisation was named as the number four risk but that given the survey was completed prior to the events in Ukraine, he expected this would likely be rated even higher today.

“Geopolitical tensions have seen increased volatility in markets worldwide,” he said. “Just as the mining sector has broad concerns around ESG risks, miners also have an eye on commodity price risk, and this remains an ongoing focus as the second highest risk in our survey.

“We are in a period of commodity price volatility and changing demand both in response to Ukraine tensions but also to the broader impacts of climate change. In the last year in particular, mainstream commodities such as nickel and copper have been in the spotlight but also critical battery minerals such as lithium have become an important part of the price risk story for miners.”

KPMG national mining leader Nick Harridge said while ESG was a top three risk, it would also deliver significant mining sector opportunity.

“In Australia as well as globally, we are seeing social and investor expectations towards ESG pushing miners to invest in innovative ways and to adapt at a faster pace. We expect the opportunity to commercialise new technologies will continue to fuel more innovation and investment, further increasing the pace of change. This is both a challenging and an exciting time for the mining industry,” he said.

Top Ten Global Mining Risks 2022:
1 Environmental risks, including new regulations
2 Commodity price risk
3 Community relations and social license to operate
4 Political instability/nationalisation
5 Global trade conflict
6 Ability to access and replace reserves
7 Permitting risk
8 Supply chain risks
9 *NEW* Talent crisis
10 Regulatory and compliance changes/burden

KPMG’s Global Mining Outlook 2022 provides deep insights into the current views of 301 mining executives from around the world.

The survey took place in January and February 2022, and included leaders from 23 key markets (Argentina, Australia, Bolivia, Brazil, Canada, Chile, China, Colombia, Greece, Hong Kong (SAR), China, India, Japan, Luxemburg, Mexico, Norway, Panama, Peru, Portugal, Russia, South Africa, Sweden, the UK and the US) and three key mining sectors (producing mining companies, mining service providers, and exploration and development stage miners).

The report is available at www.kpmg.com.au

About Ray Chan

Editor of industrial titles and mastheads with Prime Creative Media. Publications include Rail Express and Australian Mining (web content).

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