Opinion: Want more investors? Act local

The mining industry must boost its support of local communities if it’s ever going to attract enough investors for the world to meet climate-change fighting goals, a new survey and case studies show.

Even as countries clamour for critical minerals in the face of projected shortages, the industry remains underinvested.

One would expect capital to be flowing into the mining sector. But as a percentage of assets under management, commodities fell from 9% in 2009 to 2%, according to the European Securities and Markets Authority’s November 2023 report.

The single main reason investors gave for their reticence was concerns over the mining industry’s impact on local communities, including potential violations of human rights, according to a March 2024 study our group, Vancouver-based social enterprise Metals for Humanity, carried out in conjunction with FT Longitude, a unit of London’s Financial Times newspaper.

The FT’s survey of 150 global asset managers (including Blackrock, M&G and Société Générale) about the reasons for their reluctance to invest in mining also found many are wary of the industry’s business model of extraction rather than value adding, and its associated political risk.

Disruptive industry

While it is notable that an ostensibly ethical reason would dominate more pragmatic considerations among mainstream investors, it is not hard to see why that is. Mining is an inherently disruptive industry that, over the broad sweep of time, has tended to discount the interests of the communities it affects.

But, given what depends on it, it is both instructive and disheartening that investors are not more curious about recent developments in this regard.

Without discounting the potential of bad actors, when it comes to social performance, the mining industry has experienced a wholesale transformation over the last 20 years. Every major mining operator now has a C-suite executive whose responsibilities include community relations.

Working with communities and people is challenging, difficult work – as any politician will tell you. And it’s not that mining companies – that are configured first and foremost to accomplish technical tasks – always excel in this field. But there are real cases of success.

Before citing a couple of examples, it is worth noting the tremendous opportunity mining companies have to benefit local communities. Often working in remote areas beyond the reach of municipal services with technical capacity over extended periods of time, mining companies can be outstanding partners in development.

Even modest funding can make a huge improvement in quality of life for local communities. Any failure to do so might be attributed to a lack of will, inspiration, or understanding on how to set up a new program, but not the material means.

Quality of life

That said, examples of constructive engagement are not that hard to find. The Pure Silver Initiative, a project that Metals for Humanity implemented with Mexican silver miner Fresnillo (LSE: FRS), installed rainwater harvesting and point-of-use water disinfection systems that use silver – the very metal Fresnillo is extracting – to provide clean drinking water.

To date, the project has benefitted more than 32,000 people and bought clean water to communities across Durango, Chihuahua, Hidalgo and Mexico City.

In an independent, third-party assessment, community members reported both health and economic improvements – in addition to the more diffuse educational and self-organizational benefits that resulted from the program. 

Likewise, Antofagasta (LSE: ANTO) has introduced two water-related programs to help communities facing persistent drought, including people in Chile’sChoapa Valley, located 400 km north of Santiago. The company’s APRoxima program provides expertise, training, and an emergency repair service that helps local water committees construct and maintain infrastructure that ensures water for human consumption.

Meanwhile, Antofagasta’s Confluye program provides initial funding to small farmers for irrigation-improvement projects that can be recovered after the fact through government grants.

The question is why such cases – but two of many potential examples – are so little known. Mining continues to suffer the stigma of being a net negative to communities. The answer is at least twofold. 

Mining stigma

For one, mining companies are not very good at communicating to the public. Contrast that with the vertically integrated oil and gas industry, where upstream operators are also everyday brands. Mining companies do not have that kind of public profile, and they have not developed similar self-presentation skills. 

At the same time – and this is the second point – people can be incredulous. It is easy for the good work of social professionals on behalf of miners to be viewed as greenwashing. Therefore, third-party assessments and endorsements are central to a successful communications strategy.

But mining companies shouldn’t just cruise on what they’re already doing. They can and should make significant positive impacts, while responsibly extracting the resources the world needs to secure a better future for all. 

Rather than ostracizing mining companies, our time would be better spent aiding companies to do the best job they can, across all areas of operations. Instead of criticisizing from the sidelines, we should roll up our sleeves and offer our support.

The very future of the world may depend on it.

Ingrid Putkonen is the CEO of Metals for Humanity, a social enterprise that designs and implements strategic social programs in partnership with mining companies.