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Investors expect ESG improvements from gold mining sector: Tabula

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New research from European ETF provider Tabula Investment Management shows investors are expecting improvements in ESG from the gold mining sector, and many investors are unconvinced by the ESG performance of some gold mining firms.

The study by Tabula found just one in four institutional investors and wealth managers believe gold miners are “very good” at adhering to industry-wide ESG standards. Around 89 per cent expect improvements over the next five years in gold miners’ adherence to industry-wide standards, with 24 per cent expecting dramatic improvements. The research surveyed 200 gold investors at European pension funds, wealth managers, insurers and family offices responsible for over €800 billion in assets under management.

The gold mining sector has had ESG-focused policies for some time, including the World Gold Council’s Responsible Gold Mining Principles (RGMPs) which launched in 2019. However, Tabula’s research found two-thirds of investors believe miners are only “quite good” at adhering to the standards. More than four out of five estimate less than half of the approximately 200 gold mining companies worldwide are members of the World Gold Council. Currently just 32 gold mining companies are members of the World Gold Council.

The research with investors in the UK, Germany, Switzerland, France, Italy and the Nordics shows 63 per cent rate gold miners as “good” or “excellent” on the quality of diversity across the sector.

The study for Tabula, which recently announced the launch of an ESG-focused physical gold ETC, the SMO Physical Gold ETC (Bloomberg: BARS LN), found environmental degradation is seen as the biggest risk for investors from the gold supply chain, ahead of financing of conflict and terrorism. Money laundering and sanctions evasion are rated as the third and fourth biggest risks, ahead of human rights abuses.

“The gold mining industry, through the World Gold Council, has worked hard to produce ESG policies and the sector has the tools in place to be ESG focused,” says Tabula CEO Michael John Lytle. “However, it is very clear that there is a huge disparity between the most responsible miners and the industry as a whole, which increases the pressure on investors to find suitable investments.”

Tabula CIO Jason Smith added: “The risks for investors in the gold mining sector are as much to reputations as they are to the fundamentals of the asset class and the gold ETC market has to recognise that and produce products which minimise risks.”

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