Photo: Bloomberg
In the world of sustainable investment, being called socially useless is very hard to accept, writes Helen Thomas for the Financial Times.
But this was the challenge posed to the gold sector by one of the most prominent investors in mining companies. Evi Hambro of BlackRock said the gold industry needed to do a better job of justifying the environmental costs of digging for the precious metal from the earth, given its limited industrial and technological use.
(On the other hand, the extraction of copper, nickel and other metals for batteries is easier to justify, he said, given their crucial role in electrification and decarbonization.
Wondering where this ESG investment can take into account environmental, social and governance factors . Nearly 60% of annual gold demand comes from central banks or other investors; about a third comes from jewelery, where, especially in emerging economies such as India, it is also used in practice as a means of preserving value.
Those who mine gems are probably they wonder when someone will wonder if digging holes is worth something that can be done in a laboratory. But why limit ourselves to the mining industry? The luxury goods sector also needs to start thinking about its usefulness. All this skin!
But the comments had an effect, because gold is already in the midst of something like an existential crisis. It once had a reliable tribe of followers eager to evangelize its role as a defense against bad governments and weak currencies. Gold bars are now an analogue of the digital world.
The World Gold Council can rightly point out that gold and cryptocurrencies are different and can coexist peacefully. Gold has a long and relatively stable history in investment portfolios; it is essentially a scarce natural resource, but its production and ownership are diverse. No one is saying that investing in gold is a wild west that needs an aggressive, coordinated global regulatory response.
The huge electricity used to extract cryptocurrencies also means that they they are clearly not the environmentally friendly option: one estimate suggests that the carbon intensity of bitcoin mining is 15 times higher than that of gold mining. Unlike some other raw materials, most of the harmful emissions of gold are at the site of the mine, where renewable energy plus electric or hydrogen vehicles offer the opportunity to significantly reduce them.
But it is still difficult to say that the crypto has not encroached on the place of gold in unison with the spirit of the times, if not in wallets. As Humbro said, “Gold companies need to articulate their relevance in the future.” Children do not trade gold through their phones in classrooms. And none of this has been helped by a year in which the world went crazy over inflation and gold traded sideways.
One of the possibilities – and something that Hambro is defending – is to try to bring gold into the digital age and make its rather symbolic position as a medium of exchange far more obvious. This, industry says, is something that is already happening in Asian markets, where gold in digital form is well understood and used.
The other argument the industry relies on , is that gold has a social role, one that is underestimated and lacking in crypto. Much of the gold mining takes place in remote regions of developing countries. The World Gold Council says its members (part of the global sector alone) employ nearly 200,000 people plus another 1.2 million jobs through local suppliers; The Council estimates that more than 60 per cent of the value of gold mined remains in the country of origin in one form or another.
There is some irony in seeking asylum in an area where the extractive sector in general, it has long been public: its connection with local communities and its contribution to developing economies, especially in the form of higher-paying jobs and on-site processing or refining.
The official line is that the industry needs to explain what it does better. In private, some mining companies and investors acknowledge that certain practices, such as stability agreements that guarantee tax advantages or trade concessions, or the overuse of foreign labor, are becoming more difficult to justify in a world where industry is more highly valued. in terms of its ability to leave a lasting economic and social legacy in the places where it works.
In other words, the response to the crypto and climate-related existential crisis in the gold sector may is for mining companies to do more than they should have done anyway.
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