Portfolio impact – 2. ESG credentials

31 March, 2023

Gold’s ESG credentials and contributions

While gold mining is, by definition, an extractive industry, responsible gold miners follow stringent frameworks to mitigate environmental impact and reduce risks. In fact, the social and economic contribution of the gold mining industry plays a key role in the communities and host countries in which it operates. It does so through the payment of wages and taxes, supporting local economic development, improving infrastructure, and providing 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.

In addition, gold also has a potential role to play in reducing investor exposure to climate-related risks. In fact, gold’s lack of downstream emissions has important implications, as gold holdings can reduce the overall 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.

 

Important disclaimers and disclosures [+]Important disclaimers and disclosures [-]