Why ESG matters in mining Due Diligence
The mining sector’s unique challenges and environmental footprint make ESG considerations particularly crucial. Traditional Due Diligence – focusing solely on technical and financial aspects – no longer suffices in a time where social licence to operate and environmental stewardship are fundamental to a project’s success.
Mining organisations that embrace the evolution of ESG in Due Diligence processes will be better positioned to:
- Navigate regulatory changes
- Meet stakeholder expectations
- Secure funding
- Maintain social licence to operate
- Drive sustainable long-term value.
Evaluating projects with an ESG lens helps identify potential long-term liabilities. However, beyond risk mitigation, key drivers making this ESG integration essential include:
- Rising investor expectations for sustainable operations affecting access to capital
- Stringent regulatory frameworks and compliance requirements
- The need for stakeholder trust and engagement
- Increasing focus on climate change and biodiversity
- Enhanced scrutiny of social impact and human rights
- Insurance considerations and optimisation.
Key ESG components in mining Due Diligence
Environmental considerations
Environmental Due Diligence in mining requires a comprehensive evaluation of a project’s environmental impact. At its core, this involves assessing emissions profiles and carbon liability, particularly crucial in today’s climate-conscious regulatory environment. Water management and usage efficiency form another critical component, alongside detailed planning for land disturbance and rehabilitation. Companies must also demonstrate robust strategies for biodiversity protection and waste management, while developing clear approaches to climate change adaptation.
Social elements
The social dimension of mining Due Diligence centres on building and maintaining strong relationships with stakeholders. Effective community engagement and maintaining social licence are fundamental, particularly regarding Indigenous peoples’ rights and cultural heritage protection. This extends to implementing comprehensive worker health and safety programs and developing meaningful local employment and procurement practices. Success in this area requires a commitment to human rights considerations and sustainable community development initiatives that create lasting positive impact.
Governance frameworks
Strong governance frameworks underpin successful ESG integration in mining operations. This begins with effective board oversight of sustainability initiatives and extends to implementing robust ESG policies and monitoring systems. Companies must demonstrate clear compliance with regulations and standards while maintaining transparency in their reporting practices. Effective risk management systems and stakeholder engagement processes round out the governance framework, ensuring accountability and responsible corporate behaviour throughout the organisation.
Xenith’s experience in ESG Due Diligence
A great deal of value can be extracted by integrating ESG into the process of project and acquisition evaluation.
Case study: Major Australian mine acquisition
In a recent Due Diligence process for a large Australian mine acquisition, Xenith conducted a detailed ESG assessment that included:
- Comprehensive review of carbon liability under the Safeguard Mechanism
- Gap analysis of operational and corporate ESG practices against industry standards
- Future risk identification and mitigation review
- Assessment of community engagement programs
- Evaluation of environmental management systems.
Further Xenith projects involving ESG-integrated Due Diligence assignments
- Advised a Japanese joint venture partner in renegotiating their stake in a NSW Project
- Provided technical guidance for a leading mining company’s coal asset sale
- Delivered technical and financial guidance to a major Hunter Valley producer in acquiring a Tier 1 asset.
Looking ahead
The future of mining Due Diligence lies in the seamless integration of ESG factors with traditional technical and financial assessments. This approach not only mitigates risks but creates opportunities for sustainable growth and enhanced stakeholder value.
Xenith – Know the way.
Get in touch with Xenith. Our team of experts will guide you through your unique path towards quality, meaningful and compliant climate-related financial disclosures.