Climate Considered: Gold Investing – Seeking Alpha | Jewelry Dukan

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In celebration of Climate Week 2022, learn from Deputy Portfolio Manager Imaru Casanova how VanEck’s gold investment team is engaging with companies in its portfolio on climate factors and how gold companies are working to meet their emissions reduction targets.


What unique climate-related factors are driving corporate investment decisions and engagement?

Let me start by saying that with the gold strategies, the active gold strategies, we’ve spent the last few years, the last 2-3 years, formalizing the way we incorporate ESG (environmental, social, governance) factors into our investment process. Of course, these factors have always been part of our decision-making and company selection, but we’re trying to be clearer and more transparent and more formal about how we do it.

As part of this process, we started a few years ago not only to hold regular management meetings with companies in the portfolio, but also to engage with them on an annual basis to discuss environmental, social and governance issues, and environmental and social issues in particular. We find more opportunities to discuss governance issues related to processes etc. but the environmental and social aspects we thought would require a separate meeting to focus on the key drivers for our businesses at least annually.

That was step one. Then, as a second step, this year we sent out templates to companies to collect what we think are the key metrics.

I won’t go into all of them here, but when it comes to climate, it’s the obvious ones: Scope 1, Scope 2, and Scope 3 emissions. And what we’re asking companies to do is provide historical data so we can see the trend.

Ultimately, when it comes to climate, what we look at in our portfolio companies is 1) that they are in the process or have already set goals, and 2) the roadmaps of how they are going to achieve those goals.

Most companies, at least most larger companies, have already set targets for reductions over the next 10 years, and many of them have set a target of carbon neutrality by 2050.

Which technologies will companies use to achieve the climate goals?

How these companies will achieve the targeted emission reductions comes from different areas. It’s all about technology and that technology is in different stages.

They have technologies ready to be used and deployed. You are ready to implement. Then there are technologies that are in development, and then there are other areas that are really in the research stage. These are the ones that may be driving the longer-term goals but are still in the research phase.

There are a few key areas for the gold miners in our portfolio. Number one is fleet electrification, electrification of mobile devices. The resulting emissions reductions are a big driver and a big part of the plans these companies have to meet their goals.

The other source is renewable energy. Either to convert to local self-generation, as many of these mines are located in areas where local power generation is required (self-generation of electricity), i.e. to switch to renewable sources, or to switch to greener grids.

These two are key components of industrial decarbonization and of course come with challenges. One of the big challenges is battery storage, both for the electrification of vehicles, since they are large vehicles, and for the storage of renewable energy, battery technology is extremely important.

This energy needs to be stored, and while battery technology is evidently already in use, there is still much in the development and research phase that will enable these companies to achieve their goals.

Then companies look at the use of alternative fuels such as hydrogen and biofuels, as well as other more environmentally friendly fuels.

Then comes energy efficiency. Businesses can produce less carbon if they find ways to be less energy intensive. Optimizing processes and operations is another area in which companies try to make a profit.

Finally, and this is something companies are trying to use but don’t rely on and feel they may need to use, there are some carbon community offset projects. Most have made it clear that they do not expect to rely heavily on these projects, with some companies saying no more than 10%. This includes nature-based solutions: areas where carbon can either be captured or reused, or stored in a way that offsets the company’s emissions.

These are really the areas that companies are focusing on to achieve carbon neutrality.

What does the future of these companies look like?

We’re encouraged to see how companies set their goals first – most of them have them or are working towards them.

Second, we are encouraged to see how plans are developing to meet these goals. At first we were given some pretty general plans, and now companies make plans annually that are more detailed: where specific projects are, or specific sites, outlining how that reduction in emissions is going to be achieved and where it’s going to come from.

That’s very good too. And finally, we are very pleased that companies are disclosing all this information, through very comprehensive sustainability reports that contain all the information and data that we as investors and stakeholders want to publish and disclose.

For example, Newmont (NEM), the world’s largest gold mining company, produces not only a comprehensive sustainability report, but also a climate report that analyzes all climate-related risks and opportunities. This shows the level of disclosures we are currently seeing from the gold miners.

Important Disclosure

Please note that VanEck may offer investment products that invest in the asset classes or industries covered in this webinar.

The views and opinions expressed are those of the speaker and are current at the time of the video’s publication and are not necessarily those of VanEck or its employees. Video comments are general in nature and should not be construed as investment advice. References to specific securities and their issuers or sectors are for illustrative purposes only. This is neither an offer to buy or sell nor a recommendation to buy or sell the securities/financial instruments mentioned herein. The information presented does not contain any personalized investment, financial, legal or tax advice. Certain statements contained herein may constitute forecasts, projections and other forward-looking statements that do not reflect actual results, are current as of the date of this release and are subject to change without notice. Information provided by third party sources is believed to be reliable and has not been independently verified for accuracy or completeness and is not guaranteed. VanEck assumes no liability for the correctness of third-party data.

Sustainable Investment Considerations: Sustainable investment strategies aim to incorporate and, in some cases, integrate environmental, social and governance (ESG) factor analysis into the investment process and portfolio. Strategies across regions and styles approach ESG analysis and integrate the results in multiple ways. The inclusion of ESG factors or sustainable investment considerations may limit the Portfolio Manager’s ability to participate in certain investment opportunities that would otherwise be consistent with its investment objective and other key investment strategies.

ESG investing is inherently qualitative and subjective, and there is no guarantee that any of VanEck’s proprietary assessments of material ESG issues or factors used, or any assessment made by VanEck, reflects the opinion of any particular investor. Responsible practice information is obtained through voluntary or third-party reports, which may not be accurate or complete, and VanEck relies on such information to evaluate a company’s commitment to, or implementation of, responsible practices. Socially responsible norms differ by region. There is no guarantee that the socially responsible investment strategy and techniques used will be successful. An investment strategy may include securities from issuers that are not aligned with ESG principles.

ESG integration is the practice of incorporating material environmental, social and governance (ESG) information or insights into the investment decision-making process alongside traditional measures to improve long-term financial performance of portfolios. Unless otherwise stated in the investment objective of an active investment strategy, the inclusion of this statement does not imply that an active investment strategy has an ESG-oriented investment objective, but rather describes how ESG information can be integrated into the overall investment process.

Stock investments involve risk. These risks include but are not limited to the stock market, the manager or the investment style. Stock markets tend to move in cycles with periods of rising prices and periods of falling prices.

The Gold Strategy is subject to the risks associated with the concentration of its assets in the gold industry, which can be significantly affected by international economic, monetary and political developments. The strategy’s overall portfolio may fall in value due to developments in the gold industry. The strategy’s investments in foreign securities involve risks associated with adverse political and economic developments in a country or region, currency fluctuations or controls and the possibility of arbitrary action by foreign governments or political, economic or social instability. The strategy is subject to risks associated with investments in Canadian issuers, commodities and commodity-linked derivatives, taxes on commodities and commodity-linked derivatives, gold mining industry, derivatives, emerging market securities, foreign exchange transactions, foreign securities, other investment companies, management, market, non-diversified, operational -, regulatory, small and medium capitalization risks and ancillary risks.

All investments are subject to risk, including the possible loss of the money you invest. As with any investment strategy, there is no guarantee that investment objectives will be achieved and investors can lose money. Diversification does not guarantee a profit nor protect you from a loss in a down market. Past performance is no guarantee of future performance.

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Editor’s note: The summary bullet points for this article were selected by Seeking Alpha editors.

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