As interest in gold equities remains strong due to gold price performance (up ~25% YTD) on supportive macro factors (most notably low real rates), we find from our discussions that investors are increasingly factoring in Environmental, Social, and Governance (ESG) metrics and rankings in their investment decisions. While we would not characterize this trend as completely mainstream yet (particularly among North American investors), it is becoming a more meaningful part of the stock selection conversation, and each company in our coverage has emphasized it in their presentation (ESG / responsible mining is now usually one of the first few slides, ahead of financial results).  There is a growing subset of investors who apply strict ESG screens as part of their risk assessment process and filter out companies that do not meet specific ESG criteria (and are therefore deemed “un-investable”).  This report focuses on our North American Precious Metals coverage and we highlight each company’s performance on the most widely reported ESG metrics. A major challenge for ESG reporting in the mining sector is that each miner reports different metrics (adoption of the World Gold Council’s Responsible Gold Mining Principles should improve this). This report focuses on the common metrics to show relative performance.  See our inaugural Credit Suisse Precious Metals ESG Scorecard on page 3. It is worth emphasizing that mining is necessary to supply the metals used in modern technology and infrastructure, and an often overlooked benefit of mining is the scale of economic benefit it brings to local communities through employment and direct community investments. That said, there is room for improvement (especially on environmental impact) and miners recognize this and are generally prioritizing ESG. 

■ Looking for relative outperformers: Unsurprisingly, miners generally perform poorly relative to other sectors on ESG metrics (particularly on Environmental and Social benchmarks). However, some miners perform better than others and are making ESG a core part of their strategy, and this is what our report highlights. Top performers – companies that screen well across a broad range of ESG metrics – are AEM and NEM among the senior gold producers, and AGI and AUY among the intermediates. We single out NEM as having the most transparent and detailed ESG reporting. 

■ ESG coming to the fore in mining sector: Gold miners are making a concerted effort to address ESG, with most companies in our coverage reporting sustainability metrics annually, as well as the World Gold Council publishing its Responsible Gold Mining Principles, a standard framework that will likely be adopted by gold miners in the same way as All-in Sustaining Cost (AISC). However, we think miners need to do a better job of being transparent about and addressing direct environmental and social impact, rather than trying to direct the ESG conversation to the governance pillar where they tend to perform better. This will be a gradual evolution, but the initial willingness to prioritize ESG is encouraging.