Have we reached a tipping point with ESG?
03 March 2020
Recently, I was in Canada, discussing ASX listings with Canadian companies. The themes that came through from those conversations were that capital-raising conditions are tough and investors, particularly institutional investors were targeting producing assets, most of whom didn’t need cash. Other asset classes, particularly cannabis have taken funds that typically would have flowed through to the exploration space.
These themes along with my observations from Indaba and Mining 121 earlier in the year, were also echoed at the recent RIU Explorers Conference in Fremantle.
In particular, Environment Sustainability and Governance (ESG) is now a key concern for Fund managers who are facing restrictions in their mandates as to where funds can be deployed. We now see that ESG has reached a tipping point, it is front of mind for many Limited Partners and many are looking for verifiable compliance, not statements of intent.
Fund managers are also becoming more passive, they are more inclined to allocate funds to larger companies to in effect become the active management on behalf of their investors and to gain exposure to exploration via these companies, rather than direct investment into grassroots exploration.
However, there is some good news; Australia has the fourth-largest pension pool globally. This sits at $2.6 Trillion at Q4 2019 and is forecast to reach $9.5 Trillion by 2035. This provides an ongoing source of funds to be allocated and a great platform for Australian investment in overseas assets.
Looking forward, these are the trends I expect and some unanswered questions;
- Verified ESG as the minimum standard
- Producers will be funding greenfields exploration
- The rise of public image and the need for education
- A rise of Listed Investment Companies?
- True private equity participation?
- The next generation of talent?
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