Focus 2: Gold as a responsible and sustainable investment
We believe that gold should be viewed as an asset that is responsibly sourced, delivered from a supply chain that adheres to high environmental, social and governance (ESG) standards. Gold also has a potential role to play in reducing investor exposure to climate-related risks.
While gold mining is, by definition, an extractive industry, responsible gold miners mitigate environmental and social risks and contribute heavily to the communities and host countries in which they operate. They do so through the payment of wages and taxes, support of local economic development, improvements to infrastructure, and access to healthcare and schooling, and much more. The majority of this expenditure remains in the local economies of host nations and communities, as documented recently in our measurement of the social and economic contribution of gold mining. The industry is also committed to contributing to the advancement of the UN Sustainable Development Goals.
Our members, as industry leaders, are committed to the Responsible Gold Mining Principles (RGMPs), launched by the World Gold Council in 2019. These principles cover all material aspects of ESG related to gold mining and set clear expectations as to what constitutes responsible gold mining. Conformance with these Principles needs to be publicly disclosed and assured by independent experts.
In addition, we believe gold miners can contribute to the decarbonisation of the global economy and gold, as an asset, can play an important role in mitigating climate-related risks within an investment portfolio.
On a global level, gold’s overall carbon footprint is relatively small but not insignificant (under 0.4% of global emissions). However, the opportunity for the gold supply chain to reduce its total greenhouse gas emissions is well within reach. Research suggests that, unlike many other commodities and sectors, this opportunity is clear and concentrated. Most emissions associated with gold are created during its production, particularly from mining’s generation and consumption of electricity, and significant progress is already being made to reduce these power emissions.
Gold’s lack of downstream emissions has important implications for gold investors, as gold holdings can reduce the carbon intensity of the portfolio value. And the positive outlook for future decarbonisation of the gold value chain has potential benefits for the projected carbon profile, ‘implied temperature’ and climate target alignment of portfolio holdings.
Our analysis suggests that gold has the potential to perform better than many mainstream asset classes under various long-term climate scenarios, particularly if climate impacts create or exacerbate market volatility or we experience a disruptive transition to a net zero carbon economy. Furthermore, gold’s value is less likely to be negatively impacted by a rising carbon price, also offering investors a degree of insulation from the likely policy responses needed to accelerate the move to a decarbonised economy.