From an investment standpoint, This event wiped 55% off the company share price and underscores the dramatic increase of ESG investing.
Those of us working in or supporting businesses in extractive industries are aware that investment is important to insure long term viability. Managed super funds and institutional investors along with smaller investors are increasingly putting their money into organisations operating a ‘sustainable“ business model. That typically translates to investing in companies that manage risks related to Environmental factors, Social factors and Governance factors for long term profitability.
If we are not really talking about sustainable business practices, we should be because ESG investment funds make up almost 47% of Australia’s professionally managed assets with just under $600 Billion invested and they tend to out-perform standard ASX 300 and Australian equity funds on a one year, three year and 10 year time horizon. In short, its where the profit is and where the money is going.
In some industries, such as banking and finance you could argue that customers and shareholders have somewhat opposing expectations. But in our industries those stakeholders are closer than we may think. Social licence to operate and environmental responsibility are separate aspects of sustainable management but are often linked in the minds of the public. Both factors are critical to businesses operating in the extractive industry and must form part of the overall strategy. Both customers and investors not only look at the hard value offered through the products and services our businesses offer the market but increasingly evaluate how we manage the resources exploited to deliver this value. Of course they include the raw material but also the soft resources such as people, energy, water, waste and of course, money.
Australian organisations in the extractive industries typically do have the resources and the sophistication to be able to operate sustainably and many continue to develop the necessary narrative for the market. Smaller supporting organisations such as ours are challenged to first be seen to manage ESG risks as part of the overall business management plan. What is also important is to ensure our customers know how to add value to help them build a sustainable business and attract critical funding for long term profitability. As an example HR contractors and health service providers support the organisations social responsibilities where- as audit and accounting businesses offer help with governance issues and organisations such as ours help support the overall environmental responsibilities.
In collaboration, the industry presents significant long term opportunity across the investor and the customer landscape globally.