Should ESG Funds Hold Mining Stocks?

The destruction of sacred sites in Australia by Rio Tinto has forced the resignations of key executives and highlights the dilemmas faced by ESG investors

James Gard 21 September, 2020 | 11:39AM

Mining equipment

The resignation of Rio Tinto chief executive Jean-Sebastian Jacques and other senior executives after the destruction of sacred sites in Australia has again highlighted the reputational risks faced by natural resources companies. But both active and passive funds with an ESG remit continue to own companies like Rio. Where does that leave investors?

In response to the incident in May in western Australia, ratings agency Sustainalytics (a subsidiary of Morningstar) upgraded Rio Tinto’s ESG Risk Rating to 4 out of 5. That means Rio now has a “high” ESG rating rather than a “significant” (level 3) rating. “The incident has had a high adverse impact on Rio Tinto’s reputation and social licence to operate, and it has damaged the perception of the company as a leader in responsible mining,” it says.

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About Author

James Gard  is content editor for Morningstar.co.uk

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