In a given year, gold mining emits more greenhouse gases (GHG) than that of all passenger flights between European nations, say geologists from the University of Western Australia.
Gold mining and extracting gemstones also affect the environment through soil erosion, water contamination and loss of biodiversity, among others. Pollutants used in gold refining processes can contaminate the soil and nearby water sources; a study published in 2021 links gold mining in southern Ethiopia to high levels of arsenic and increased concentration of cyanide and lead in rivers there.
No surprise, then, that gold companies are scrutinised for their sustainability commitments. Newmont Corp, the world’s largest gold mining company, pledged in November 2020 to reach net-zero carbon emissions by 2050. The Colorado-headquartered corporation has also committed to a 2030 target to cut GHG emissions by 32% for Scope 1 and 2 emissions from a 2018 baseline, and reduce Scope 3 emissions by 30% from a 2019 baseline.
Newmont says its Scope 1 and 2 baseline emissions are split 60:40 between purchased and generated power, and diesel consumption by mining fleets. To achieve its 2030 targets, Newmont says it will turn to renewable power sources and transition to electric vehicles.
On water efficiency, all of Newmont’s sites aim to maintain a “greater-than-5% reduction” in fresh water consumption, and sites in water-stressed areas aim to reduce by at least 10% from a 2018 baseline. All sites achieved their site-specific water efficiency activities for 2022, resulting in 17% reduction in fresh water consumption compared to Newmont’s 2018 baseline, but the water-stressed sites did not meet the higher 10% target.
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Founded in 1921 and publicly traded since 1925, Newmont is the only gold producer on the S&P 500 Index. In 2022 and for the 15th year in a row, Newmont was in the Dow Jones Sustainability World Index.
If the World Gold Council’s (WGC) Gold and Climate Change report is to be believed, gold production is one of the most environmentally-friendly resource mining operations. According to the WGC, the total carbon emissions for global gold production are “significantly” smaller than most other major mined products, such as coal, steel and aluminium.
“On a value basis, gold has among the lowest GHG emissions per dollar of the main mined products. In other words, the volume of GHG emissions associated with a dollar spent on gold is lower than for a dollar spent on most other mined products,” reads the 2018 report.
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Gold as an asset is “fairly unique” among extracted products, says WGC chief market strategist John Reade. “It has no downstream, no Scope 3 emissions. Therefore, putting a gold bar or physical gold into your portfolio has no ongoing greenhouse gas emissions, unlike the companies that are behind the equities and bonds.”
Scope 3 emissions for mining consist of all indirect emissions that the organisation impacts, such as the “upstream” production of fuels used in the mining operations, or the “downstream” smelting, refining and manufacturing processes utilising the mined ore. As gold is not used in the same way as coal, for example, one could say that the metal does not contribute to downstream Scope 3 emissions.
Reade considers environmental, social and governance (ESG) concerns old news for gold stocks. “I don’t see too much downside as a consequence of additional ESG threats from here… The ESG focus on companies has been a factor affecting all extractive industry equities. I don’t know how much more of that there is to play out.”
Rather, he sees “potential” that investors could begin to recognise the gold mining sector’s goals to become carbon-neutral by 2050. “They [could] recognise the good work that has been done on the ESG front; I think there is the potential for investors to become more comfortable with that in gold-mining companies.”
What is a responsible gold mine?
The London-headquartered WGC is an association of the world’s leading gold mining companies. In 2019, the WGC launched the Responsible Gold Mining Principles, a framework that sets out expectations for consumers, investors and the gold supply chain as to what constitutes responsible gold mining.
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All implementing companies must disclose their performance and have this independently assured by an external expert. While the Responsible Gold Mining Principles are available for use for all gold mining companies, they are mandatory for members of the WGC. Members who fail to comply will be asked to leave.
Prior to the launch of the Principles in 2019, there were many laws and standards that spoke to individual elements of responsible gold mining, says Terry Heymann, CFO at the WGC. “But there wasn’t a single overarching framework that helps consumers, investors and other interested stakeholders understand all that should be expected of a responsible gold mine.”
Aside from his CFO role, Heymann also leads the WGC’s ESG agenda. “We have three full-time staff as well as a number of senior advisers and consultants working on our ESG programme. More broadly, we work extensively with our members on not only responsible mining, but also on the positive and sustainable socioeconomic development that this leads to,” he says.
The WSG’s ESG team has produced research on gold and climate change for the past five years. “What is interesting about gold is that the vast majority of GHG emissions are associated with the mining phase. Downstream emissions, or so-called Scope 3, are small, unlike almost every other commodity. As such, there is huge potential to decarbonise the entire gold supply chain through decarbonising gold mining, which is happening through increased use of renewables and greater energy efficiency,” says Heymann.
Holding gold can even lower the overall GHG emissions of an investment portfolio, says Heymann. “Once the gold is produced, there are effectively no incremental emissions. This makes it very interesting for investors looking to lower the overall emissions profile of their portfolio.”
The gold mining industry can play an outsized role in having a positive impact, he adds, by nature of largely operating in remote locations “where there often isn’t much economic development”.
The WGC and its member companies support the responsible mining and trading of gold from all legitimate sources, including artisanal and small-scale gold mining (ASGM), says Heymann. “There has been a significant growth in ASGM in many developing countries over the past 20 years. International institutions like the World Bank estimate that 15 to 20 million people derive their livelihoods primarily from ASGM, and up to 20% of newly-mined gold comes from ASGM sources.”
However, the great majority of ASGM takes place outside legal frameworks, which causes an association with poor ESG practices.
To ensure mineral resources are developed and mined in ways that best support sustained social and economic development, Heymann calls for clear government guidance and regulatory frameworks. “The WGC is committed to working with policymakers to help develop appropriate strategies to encourage greater formalisation of ASGM, while also recognising the significant differences from responsible large-scale gold mining.”
Academics weigh in
Gold mining is becoming more prevalent owing to demand for manufacturing electronics and alternative energy.
Persistently rising gold costs also make once-unfeasible mining projects more lucrative, says a team of students and faculty from the Yale School of the Environment. Surface mining “completely reshapes the topography” of the area, says Nora Hardy from the 2022 cohort of Yale’s Master of Environmental Science programme. “It also depletes and disturbs the topsoil that contains nutrients and seeds necessary for plant growth, and tropical regions often [already] have nutrient-poor soils.”
Because recovering soil health following mining is a “lengthy and costly” process, they emphasise the importance of topsoil conservation practices, or moving topsoil prior to mining and storing it separately to conserve the nutrients and seeds, to be returned to the mining site when the operations are complete.
Today, nearly a quarter of annual gold demand is supplied through recycling, making it one of the world’s most recycled materials, says Stephen Lezak, research manager at the Smith School of Enterprise and the Environment, University of Oxford. “The recycling process uses no mercury and has less than 1% of the water and carbon footprint of mined gold.”
Lezak wrote about his research model in a Feb 14 article on Australian academic news network The Conversation. His research involved hypothetical scenarios where gold consumption could decline to “more sustainable levels”. “Our model showed that the gold used for industrial purposes (mainly in dentistry and smartphones) could be supplied for centuries even if all gold mining stops tomorrow.”
Jewellery, too, could still be produced with recycled gold in a fully circular gold industry, as stated in Lezak’s model. “There would just be about 55% less to go around, which would still leave more than enough for essential uses,” he writes.
Danish jewellery manufacturer and retailer Pandora, for example, has committed to purchasing 100% recycled silver and gold for the crafting of its jewellery by 2025.
That said, a world with a shrinking supply of gold would likely mean a pricier bullion. Lezak thinks jewellery purchases would shift to cheaper and more durable alloys of gold that are “already popular”.
“In the future, demand for gold may decline as consumers become more concerned with making sustainable choices,” he writes.
Photos: World Gold Council
