spRING 2011 GlobAl MARKETs INTERNATIoNAl - Willis

iNteRNatioNal FoRCes
The origin of most international standards
and expectations for environmental and social
performance in the Mining sector is the E.U.,
North America and Australia. This doesn’t
mean that ‘west is best’ – both east and west
do some things well and we need to learn and
adopt good practice from both.
Perhaps the most influential force for
improving sustainable practices at the moment
is the Equator Principles (EPs). Many financial
institutions are signatories to the EPs and the
requirement for projects to be compliant is
being driven by them.
The Equator Principles require adherence to
the World Bank/IFC Performance Standards.
The World Bank has been a major driver
in developing consistent and practical
environmental and social performance
standards across a range of industry sectors,
especially in developing countries, but with
many lessons for transitional and recently
independent economies.
The European Union has developed and
issued a number of Directives which, whilst
binding only on member states, have served
as models for many countries that are
developing their own regulatory systems.
Those of particular relevance for mining
include Directives covering EIA (project and
strategic assessment), water resources and the
management of Mine Wastes.
These are not separate stand-alone systems; they
have evolved together through international
collaboration and are largely consistent.
FiNaNCial iNstitutioNs aNd leNdeRs
As mentioned above, many financial institutions – principally
commercial banks – are signatories to the Equator Principles, which
commit them to ensuring that the projects to which to lend are
compliant with certain environmental and social standards. As well
as Environmental and Social Impact Assessment requirements,
the Equator Principles require the implementation and continuing
commitment to the environmental and social management plans,
as a condition of any loan. In other words, the post-permitting
implementation is audited and checked, ensuring follow through from
assessment during permitting and financing, to management plans
during operation.
In addition, equity markets are also influencing sustainability in many
industrial sectors. Natural resource company listings on international
stock exchanges, particularly London, include requirements for
reporting on a company’s health and safety record, environmental
performance and social community relations as part of the Competent
Persons Report (Mineral Experts Report) published in the prospectus.
Other measures such as Sustainability indices and reporting will
become increasingly important in maintaining shareholder interest.
Why should CoMPaNies CaRe aBout sustaiNaBility aNd
tRaNsPaReNCy?
There are three main reasons why sustainability and transparency are
important to a company:
1. Reputation and image:
• Share price and investor concerns;
• Ability to raise capital;
• Ability to gain permits and licences.
2. Access to finance:
• Access to loan finance and gap finance such as from EBRD;
• Environmental, Social and Closure Liabilities can affect value of
assets and collateral.
3. Economic benefits:
• Reduce costs (waste reduction, energy costs);
• Reduce environmental taxes, particularly for Carbon;
• Take advantage of income from CERs and carbon trading.
Willis | Mining Market Review 2011 | 77