Posted on 05 February 2020
With water crises worsening across the world, a new WWF report highlights the range of water risks facing the mining industry – and calls on companies and investors to urgently assess and respond to the growing water risks to their businesses and assets.
Published today as mining companies and investors meet in Cape Town for the annual African Mining Indaba, the first exhaustive analysis of water risks facing the mining sector looked at 3,174 operating mine sites – most of which are located in regions facing high overall water risk.
With the extractives sector suffering over US$20 billion in water-related financial impacts in 2018 alone according to CDP, this report highlights the companies, commodities, river basins and countries facing the highest overall water risks, including floods and water scarcity as well as reputational and regulatory risks.
The most exposed large public mining companies are Coal India followed by Grupo Mexico and China Shenhua Energy, while the top commodities on the list include chromite, coal, palladium, platinum, bauxite and lead. Asian river basins and countries, including India and China, dominate those two lists – alongside South Africa, Mexico and Peru.
“Mining companies face substantial water risks from the reputational threat of potential disasters to the direct financial impact of extreme floods and water scarcity on their operations – physical risks that will be exacerbated by climate change,” said Alexis Morgan, WWF Global Water Stewardship Lead and author of the report.
“Investors can no longer turn a blind eye to these water risks: they must start demanding rigorous assessments of water risks – accounting for basin and operational water risk and water stewardship responses – before investing in mining operations.”
The analysis was conducted through WWF’s Water Risk Filter – a leading tool for companies and investors to explore, assess, value and respond to water risk – using S&P ‘SNL Metals & Mining’ database (tied to their Global Market Intelligence Platform).
Overall, metal and mineral commodities are exposed to moderately high levels of water risk, including high levels of reputational risk and increasing physical risks. India Coal, Anglo American and Glencore are relatively highly exposed to flood risks, in particular due to the possibility that floods could lead to the failure of tailings dams – such as the catastrophic collapses in recent years in Brazil and Canada.
The analysis shows that the world’s two largest mining companies, BHP Billiton and Rio Tinto, are exposed to lower than average physical and regulatory water risks, but higher than average reputational water risks.
Aside from agriculture, perhaps no sector is as exposed to water risks as the mining sector. Unsurprisingly, the mining sector has been heavily engaged on water issues with International Council for Mining and Metals (ICMM) releasing extensive guidance on water stewardship.
“Some mining companies have taken significant steps to assess and address their specific water risks but the sector has not done nearly enough to collectively respond to water risks,” said Morgan. “Our analysis underlines the scale of the risks posed by water to mining operations: the industry needs to transform its approach to mitigate them.”
This new analysis represents a first step towards a future in which asset-level data contributes to more sophisticated and accurate Environmental, Social and Governance (ESG) assessment for investors and companies reliant upon metals and mining.