23 May 2024

A recent study conducted by Tabula sheds light on investors’ expectations regarding ESG improvements within the gold mining sector. The findings reveal that while the industry has made strides in adopting ESG-focused policies, there remains significant room for improvement.

Investor sentiment towards ESG performance in gold mining

According to the study, only one in four institutional investors and wealth managers believe that gold miners are « very good » at adhering to industry-wide ESG standards. This sentiment underscores a prevailing skepticism among investors regarding the ESG performance of some gold mining firms.

Despite initiatives like the World Gold Council’s Responsible Gold Mining Principles (RGMPs), launched in 2019, the study indicates that two-thirds of investors perceive miners as only « quite good » at adhering to these standards. Moreover, a substantial portion of investors estimate that less than half of the approximately 200 gold mining companies worldwide are members of the World Gold Council.

Meeting investor demands: the rise of ESG-focused investment?

In response to these findings, investors are expecting significant improvements over the next five years in gold miners’ adherence to industry-wide standards, with 24% anticipating dramatic improvements. This growing demand for enhanced ESG practices within the sector is driving the need for responsible investment options. Environmental degradation emerges as the primary concern for investors within the gold supply chain, surpassing other risks such as financing of conflict and terrorism. With increasing emphasis on responsible sourcing, the launch of products like the SMO Physical Gold ETC is a pivotal step towards meeting these demands.

Tabula CEO Michael John Lytle emphasises, « The gold mining industry has the tools in place to be ESG-focused, but there is a significant disparity between responsible miners and the industry as a whole. » This gap underscores the importance of providing investors with transparent and trusted investment options.

Tabula CIO Jason Smith adds, « The risks for investors in the gold mining sector extend beyond financial considerations to reputational risks. » Recognising these concerns, the SMO Physical Gold ETC aims to offer investors a vehicle that minimises such risks while maintaining liquidity, efficiency, and security.

SMO Physical Gold ETC: A solution for responsible investing

The SMO Physical Gold ETC is the first exchange-traded physical gold product to offer full traceability of gold bars from mine to vault. It excludes gold of Russian origin, avoids sourcing from controversial mines or miners, and refrains from holding gold of unknown provenance. Importantly, the extraction process for the gold held by BARS does not involve the use of mercury.

As investor expectations for ESG improvements within the gold mining sector continue to rise, initiatives like the SMO Physical Gold ETC represent a promising solution. By prioritising transparency, traceability, and responsible sourcing, these products empower investors to align their portfolios with their values while mitigating risks associated with traditional gold investments.