New research* from European ETF provider Tabula Investment Management Limited (“Tabula”) shows investors are expecting improvements in ESG from the gold mining sector, and many investors are unconvinced by the ESG performance of some gold mining firms.
The study by Tabula found just one in four institutional investors and wealth managers believe gold miners are “very good” at adhering to industry-wide ESG standards. Around 89% expect improvements over the next five years in gold miners’ adherence to industry-wide standards, with 24% expecting dramatic improvements. The research surveyed 200 gold investors at European pension funds, wealth managers, insurers and family offices responsible for over €800 billion in assets under management.
The gold mining sector has had ESG-focused policies for some time, including the World Gold Council’s Responsible Gold Mining Principles (RGMPs) which launched in 2019. However Tabula’s research found two-thirds of investors believe miners are only “quite good” at adhering to the standards. More than four out of five estimate less than half of the approximately 200 gold mining companies worldwide are members of the World Gold Council. Currently just 32 gold mining companies are members of the World Gold Council.
The research with investors in the UK, Germany, Switzerland, France, Italy and the Nordics shows 63% rate gold miners as “good” or “excellent” on the quality of diversity across the sector.
The study for Tabula, which recently announced the launch of an ESG-focused physical gold ETC, the SMO Physical Gold ETC (Bloomberg: BARS LN), found environmental degradation is seen as the biggest risk for investors from the gold supply chain, ahead of financing of conflict and terrorism. Money laundering and sanctions evasion are rated as the third and fourth biggest risks, ahead of human rights abuses.
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 holds no gold of Russian origin, does not source gold from controversial mines or miners, and holds no gold that is “recycled” or of unknown provenance. Importantly, no mercury is used in the extraction of the gold held by BARS.
“The gold mining industry, through the World Gold Council, has worked hard to produce ESG policies and the sector has the tools in place to be ESG focused,” says Tabula CEO Michael John Lytle. “However it is very clear that there is a huge disparity between the most responsible miners and the industry as a whole, which increases the pressure on investors to find suitable investments.”
Tabula CIO Jason Smith added: “The risks for investors in the gold mining sector are as much to reputations as they are to the fundamentals of the asset class and the gold ETC market has to recognise that and produce products which minimise risks.”
The SMO Physical Gold ETC uses gold from a small number of named mines, has full traceability across the supply chain, and is designed to provide the same level of liquidity, efficiency and security as other physical gold ETCs.
Single Mine Origin (SMO) Limited, an independent company set up in 2017, conducts extensive due diligence and ongoing monitoring of the participating mining companies, mines and refiners, and oversees and documents every step of the supply chain. The result is a transparent and trusted standard for responsibly sourced gold.
The SMO Physical Gold ETC has US$34 million in assets and is listed on the London Stock Exchange. It has a TER of 0.29% and has been launched in partnership with leading global gold custodian HSBC.
- *Tabula Investment Management commissioned the market research company Pureprofile to interview 200 gold investors working for pension funds, insurers, family offices and wealth managers in the UK, Germany, Switzerland, Italy, France, Sweden, Finland, Denmark and Norway with a total of €809.75 billion assets under management. The survey was conducted in December 2023.
