The mining sector must keep sight of the bottom line as it embraces investors’ calls for greater action on climate change and moves to cut carbon dioxide emissions, according to Rio Tinto Group’s top executive.
“There is no doubt that acting responsibly is an absolute necessity for our industry,” Rio’s chief executive officer Jean-Sebastien Jacques said in notes of a speech Monday in London. “We must continue to be part of the solution, but our approach needs to be based on a pragmatic kind of sustainability — with profitability at its heart.”
A greater focus among investors and society on the source of carbon emissions will mean increasing scrutiny of raw materials and how they are produced, Jacques said. London-based Rio, the world’s second-biggest miner, said last month it would work with China’s top steel producer on plans to lower the sector’s impact on the climate.
The world’s largest miners and energy producers, including Rio and rival BHP Group, are being pushed by investors to set tougher targets to curb emissions, divest their most polluting assets and do more to prepare for the impacts of a changing climate.
Aberdeen Standard Investments and Legal & General Investment Management last week joined a push by investors holding $11 trillion in assets calling on miners to cut funding of lobby groups which promote policies inconsistent with the Paris climate accord.
A weaker outlook for global growth — and tepid demand for some materials — means the biggest miners may also need to focus on smaller-scale developments and rule out big-ticket acquisitions, Jacques said in the notes for a speech to mark the start of LME Week.
“With slower global economic growth likely, at least in the years ahead, the appetite for risk-taking in our industry will be low and non-organic growth will be harder to come by,” according to Jacques. “All-in-all, I think a different way of looking at growth may be needed.”
The mining sector also remains chastened by a near $1 trillion decade-long investment spree on deals and projects through 2010 that resulted in about $250 billion of writedowns, including by Rio, he said.
Smaller mines with options to expand will be preferable to large developments, as they can be built quickly and start delivering benefits to investors, communities and governments faster. Rio is testing new approaches at its Winu copper discovery in Australia, Jacques said.
© 2019 Bloomberg L.P.