Four gold stocks that's a treasure trove for ESG

Focus on environmental, social, and corporate governance (ESG) strategies remains a strong performance indicator for investors concerned about the sustainable future of the gold and mining industry.

In the last several years, droves of mining companies have begun reporting ESG data, using these as key metrics to overturn investor sentiment and provide more strategic forward-looking guidance.

At the same time, ESG-focused investments are now a trillion-dollar opportunity, according to a 2022 PwC Asset and Wealth Management Revolution Report. Analysts estimate that ESG assets under management are expected to hit $33.9 trillion by 2026, representing an annual 12.9% growth rate, and up from the $18.4 trillion recorded in 2021.

Furthermore, there has been a strong indication that investors are seeking to allocate more of their portfolios to companies and funds that hold ESG goals in their investment strategies.

While there is some indication that mining companies have started addressing ESG-related goals, there remains significant room for improvement and adoption of more aggressive strategies that can physically address ESG issues within the global gold mining industry.

Gold Mining Companies Investing In ESG Policies

Corporate leaders have quickly realized the integral role ESG commitments play in the long-term sustainability of building and operating a business in the current economic climate.

While there are macroeconomic challenges that pose potential headwinds for these companies in terms of their forward-looking guidance, investors attempting to decarbonize their portfolios need to keep a watch on some of the following four gold mining stock options.

Boliden

Swedish multinational mining company, Boliden (OTCMKTS: BDNNY) is on the fast track to become one of the most innovative, and perhaps sustainable mining companies in its home country Sweden, and worldwide.

Over the last several years, Boliden has heavily invested in the transformation of the Swedish mining industry, working closely with local authorities and government agencies to achieve these goals.

Following its latest sustainability report, there is a strong indication that the company is improving its operations to create a more sustainable, and enhanced business model.

As part of its environmental efforts, the company directly contributed to the construction of one of the world’s biggest wind farms. This was an attempt to provide investors and consumers more transparency on the development of copper products, and part of their initiative for Low-Carbon Copper products.

What’s more, the Boliden sustainability report addresses key market issues relating to carbon emissions, and a forward-looking roadmap that shows corporate strategies to reduce their carbon emissions and decrease these components below the global average.

Looking at the company’s share performance, there is perhaps an indication that investors will need to have a Hold position on BDNNY. Over the last six months, share prices have dipped by 37.57%, and are currently trading in a year range of $51.15 - $92.60 per share.

In terms of its financials, year-over-year revenue ending June 2023 was up by 25.94%, however, it could seem somewhat misleading not to mention that quarterly revenue for the period ending June 2023 was down 14.49%.

There could be an upside for BDNNY in the coming years, seeing as the company operates several open pit mines, across Denmark, Finland, Norway, Sweden, Ireland, and parts of the United Kingdom, and northern Europe.

Keep in mind that like many other extraction companies, across the world, Boliden has come face-to-face with human rights groups and climate activists in the past, as pressure mounted for the company to build more sustainable policies that would see them reconcile their impact on the environment and indigenous groups.

Franco-Nevada

Franco-Nevada (NYSE: FNV) is a Canada-based gold-focused royalty and streaming company. The company claims to hold one of the world’s most diversified gold-focused portfolios, with significant cash-producing assets.

Perhaps one of the key elements that has made Franco-Nevada increasingly popular among investors in recent years is its direct effort to provide investors with minimal cost exposure, and inflation changes.

While the company holds a diverse portfolio, looking at its sustainability data, Franco-Nevada has heavily invested in the improvement of corporate diversity and inclusion efforts, and is one of few mining companies that looks to improve employee well-being, while at the same time practicing climate due diligence.

As part of their initiative to improve inclusive hiring efforts, the company has a 43% senior management and 60% global employee headcount that represents persons from diverse and ethnic communities. Recently, the company has been aiming to further broaden its diversity targets, looking to have at least one diverse director by 2025, which will expand beyond gender diversity.

Overall, there is a strong focus within the company’s ESG policies to improve and build more sustainable corporate diversity efforts, which could become a landmark example for other gold and mining companies.

Based on the most recent stock market performance, FNV advanced by 1.14% on August 22, outpacing the Canadian market, as the S&P/TSX Composite Index fell by 0.28% in single-day trading.

During the first half of the year, FNV performance climbed by nearly 13%, and overall year-to-date performance is up by 1.70% as stocks attempt to reclaim their position following a decline from its peak in May this year.

Cash flow remains steady, although net income was down by 6% quarter over quarter, for the period ending June 2023. There is more room for improvement in terms of the company’s balance sheet, however, the last leg of the year could provide Franco-Nevada with more promising returns and performance as they look to increase their investment activities.

Gold Fields

Gold Fields (NYSE: GFI) is perhaps one of the oldest, and most prominent gold mining companies in the world, operating exploration sites in Australia, Ghana, Peru, and South Africa.

Aside from being one of the biggest gold mining companies in the world, it’s also known to be the biggest in South Africa, where it is currently headquartered.

The mining and exploration company is one of a handful that has continuously published ESG reports over the last several years. More than this, their reporting is perhaps the most extensive, as it provides a comprehensive overview of the company’s sustainability operations across all of its operating regions.

Following its most recent sustainability report, the company highlights three priority categories, including decarbonization efforts, water improvement, and effective corporate management.

More than this, Gold Fields has a comprehensive forward-looking strategy that involves several phases of decarbonization, which includes the utilization and improvement of clean energy sources, and a later phase that would include the electrification of all fossil fuel-powered machinery and equipment.

Across most of its African regions, the company is looking to further expand the improvement of energy consumption, and investing in the upgrading of power plants, and renewable energy sources.

This comes at a critical time for the company, as the national utilities provider in South Africa has been under pressure to provide the country with enough electricity capacity, resulting in daily energy shortages. Based on current stock market performance, Gold Fields have been dealing with major economic headwinds, across most of its operating regions. More than this, the company has also changed senior management, which has further placed strain on GFI shares.

Nonetheless, the year has been somewhat promising, as share prices have climbed by 26% to date. The trailing two weeks ending July witnessed share prices tumbling by 26%, however, recently shares have regained their traction, advancing 6.65% between August 17 and August 23.

Overall there is significant room for improvement in terms of the company’s balance sheet, as it reported a net income increase of 1.39% for the period ending June 2023. Economic difficulties in South Africa have also meant that the company has seen share prices sink over the last several months, however, in terms of ESG policy performance, Gold Fields remains one of the strongest among its competitors.

Wheaton Precious Metals

The Canadian-based mining and exploration company, Wheaton Precious Metal (NYSE: WPM) has a broad portfolio, operating 19 mines across the world, with an additional 13 development projects.

The company, which was previously known as Silver Wheaton, exclusively mined silver, however since 2017, Wheaton Precious Metals has further broadened its exploration into other metals, more importantly, gold.

Like many other exploration companies, Wheaton has introduced a comprehensive sustainability policy, which covers most of its exploration regions. More than this, the company has been recognized as one of the best Precious Metals and ESG Global 50 Top Rated by Sustainalytics companies.

A review of its 2022 sustainability report indicated that Wheaton is one of the best Corporate Citizens in Canada, as its environmental efforts include renewable and green energy, effective water management, and improvements in air quality and pollution.

More than this, the company currently has a forward-looking strategy to reduce carbon emissions by 50% by 2023 from its 2018 baseline. While this would require significant investment, it provides investors with a key metric at which they can measure the success and application of Wheaton Precious Metals’ ESG goals.

Unlike other corporate exploration companies, Wheaton has roughly 41 employees, which allows them easier adoption of corporate governance policies, and effective leadership training.

WPM shares are currently trading at a year range of $28.62 - $52.76 per share, and year-to-date performance has risen by nearly 6%. During the first half of 2023, stock prices climbed 5.10%, and peaked at $52.22 per share in May 2023.

While the broader share performance of WPM has come down slightly, analysts have placed shares in a Moderate Buy rating, seeing as potential long-term gains, and company performance could be a major winning factor for its stocks.

A look at its balance sheet shows that although the company is in a steady position, there is still some room for improvement, after marking a net income decline of 5.12% for the quarter ending in June 2023.

Difficult economic conditions across its operating regions have meant that the company had experienced a challenging first few quarters, but perhaps in the coming months, there could be more potential upside for WPM, both in terms of stock performance and ESG strategy implementation.

Final Thoughts

There is big potential for companies that are investing in environmental, social, and corporate governance goals. Not only is this providing them with a forward-looking roadmap that could assist them in building more reliable business strategies.

With this in mind, investors will need to consider how these companies are aligning themselves in terms of sustainability, improving social inclusion, and broadening corporate governance.

Taking these efforts into consideration, investors could further decarbonize their portfolios but also invest in exploration companies that are investing to improve environmental and social participation, not only in the countries where they are headquartered but more so in those where their exploration activities are directly impacting local communities.

Disclosure: No positions

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Contributing to kitco.com