Environmental, social and governance (ESG) factors could pose a risk to some of the world’s largest mining companies in the future, UBS analysts have warned.
The emerging focus on ESG may not have been factored into the companies’ share prices yet, UBS pointed out, with the likes of government policy changes or technical innovation posing potential risks as governments pursue net zero policies.
Anglo American PLC (LSE:AAL), Rio Tinto PLC (LSE:RIO), BHP Group Ltd (LSE:BHP, ASX:BHP) and Glencore PLC (LSE:GLEN) were all among the list of miners UBS believed could be affected operationally or by higher expenditure by “step-changes in regulation,” the bank said in a note.
“Climate change is a challenge for the industry which is a major emitter of carbon dioxide,” the bank warned.
“This is likely to result in higher capital expenditure.”
Diversifying into the production of critical metals and materials key to electrification could indeed provide companies with opportunities, UBS reassured as it backed Endeavour Mining and Glencore with ‘buy’ ratings.
Rio Tinto and BHP were hit with ‘sell’ notes though, given their exposure to “commodities which will be in structural demand decline long-term,” UBS said, such as iron ore which could be hit by a growing reliance on scrap.