- Modern mining enterprises could play a significant role in global biodiversity loss.
- We identified over 20% of global mines owned by MSCI ACWI Investable Market Index (IMI) constituents located in regions identified as biodiversity hotspots (areas with rich but threatened ecosystems).
- A further 13% of mines were in areas with highly intact ecosystems.
As the global economy expands, will biodiversity losses become the next crisis facing humanity, possibly surpassing climate change?1 The World Economic Forum estimates that more than 50% of global GDP (USD 44 trillion) “is moderately or highly dependent on nature and its services,” and therefore exposed to biodiversity loss.2 For investors, growing scrutiny on biodiversity risks could have implications for industries that threaten biodiversity or environments of high conservation value.
Modern mining enterprises are a leading source of heavy-industrial operations that enter remote and undeveloped areas, potentially damaging habitats and degrading local environments. Mines pitted against fragile and pristine environments face increased risks of operational roadblocks, stakeholder resistance and investor concerns.
Identifying Mines Located in Biodiversity Hotspots
Mining operations could have troublesome impacts on ecosystems in areas identified as biodiversity hotspots, which meet two criteria: 1) have at least 1,500 endemic, native vascular-plant species and 2) have lost 70% of primary vegetation.3
Over 20% of global mines (641 out of 3,146) owned by MSCI ACWI IMI constituents as of Oct. 30, 2020, were located in regions identified as biodiversity hotspots. The majority of companies (61%) had at least one mine located in a biodiversity hotspot; 16% of companies had a majority of their mines in such locations. The biodiversity hotspots with the most mines were in the Tropical Andes (162 mines), Madrean Pine-Oak Woodlands (79), Atlantic Forests (66), Sundaland (50) and the Chilean Valdivian Forests (43).
Mines in Biodiversity Hotspots
Source: Myers, N., Mittermeier, R.A., Mittermeier, C.G., da Fonseca, G.A.B., and Kent, J. “Biodiversity hotspots for conservation priorities.” Nature, Feb. 24, 2000. S&P Global Market Intelligence. MSCI ESG Research LLC, as of Oct. 30, 2020.
Mining vs. Pristine Environments
Protection of pristine environments is another critical component of biodiversity conservation. In contrast to the threatened status of biodiversity hotspots, pristine environments have highly intact ecosystems. Encroachment on these intact areas could degrade some of the last remaining wild areas on Earth. We approximated pristine areas as those that have at least 97% of their biodiversity intact, based on the Biodiversity Intactness Index, which measures changes in local biodiversity at a spatial resolution of approximately one square kilometer due to land use and related pressures.4 We identified 13% of mines owned or operated by constituents within the MSCI ACWI IMI as operating or with proposed operations on these intact lands.
Mines in Pristine and Intact Environments
Source: Newbold, T., Hudson, L., Arnell, A., and Contu, S. "Has Land Use Pushed Territorial Biodiversity beyond the Planetary Boundary? A Global Assessment." Science, July 15, 2016. S&P Global Market Intelligence. MSCI ESG Research, as of Oct. 30, 2020.
Mining in Biodiversity Hotspots and Intact Environments
Areas that are both highly intact and in regions of biodiversity hotspots represent some of the last vestiges of pristine environments within these threatened ecosystems. Combining the maps of intact environments and biodiversity hotspots allows us to see which companies operate in these areas of high conservation value. The companies with the highest percentage of their 2019 reserves value5 in these environments include Southern Copper Corp. (46%), Endeavour Mining (42%), Pan American Silver Corp. (30%), Newcrest Ltd. (28%), Zijin Mining (23%), Alamos Gold Inc. (21%), Banpu Public Company Ltd. (20%), Sumitomo Metal Mining Co. (9%), Newmont Corp. (8%), South32 (7%) and Peabody (4%).
Combined Map of Mines in Biodiversity Hotspots and Intact Environments
Source: Myers, N., Mittermeier, R.A., Mittermeier, C.G., da Fonseca, G.A.B., and Kent, J. “Biodiversity hotspots for conservation priorities.” Nature, Feb. 24, 2000. Newbold, T., Hudson, L., Arnell, A., and Contu, S. "Has Land Use Pushed Territorial Biodiversity beyond the Planetary Boundary? A Global Assessment." Science, July 15, 2016. S&P Global Market Intelligence. MSCI ESG Research, as of Oct. 30, 2020.
Litigation, increased regulation, protest or reputational damage due to adverse impact or threats to biodiversity could decrease company value and increase their cost of capital. These risks may escalate as investment firms begin to measure and report their impacts on biodiversity. Several large investment firms have shown interest in two new financial frameworks on biodiversity loss: the Task Force on Nature-related Financial Disclosures (TNFD) and the Partnership for Biodiversity Accounting Financials (PBAF). The TNFD in particular has the support of 49 different financial institutions and firms from various parts of the globe such as AXA, BNP Paribas, Citi, Credit Suisse, Danske Bank, Lloyds Banking, Manulife, Mirova, PIMCO, Robeco and Wells Fargo Asset Management.6
The EU’s Sustainable Finance Disclosure Regulation (SFDR) may also require EU financial-market professionals to disclose the share of their investments exposed to areas of high biodiversity and provide metrics on the biodiversity impacts of their investments.7
Metal mining is expected to increase over the coming decades due to demand for new energy infrastructure and continued development in emerging markets. Future demand for minerals may increase the likelihood that metal-mining companies develop mines in lands of high biodiversity value.8 However, an increased focus by regulators and people around the world on the loss of biodiversity may heighten risks to those invested in these projects.
1Carrington, D. “What is biodiversity and why does it matter to us?” Guardian, March 12, 2018.
2Russo, A. “Half the World’s GDP Moderately or Highly Dependent on Nature, Says New Report.” World Economic Forum, Jan. 19, 2020.
3Myers, N., Mittermeier, R.A., Mittermeier, C.G., da Fonseca, G.A.B., and Kent, J. “Biodiversity hotspots for conservation priorities.” Nature, Feb. 24, 2000.
4Newbold, T., Hudson, L., Arnell, A., and Contu, S. “Has land use pushed terrestrial biodiversity beyond the planetary boundary? A global assessment.” Science, July 15, 2016
5Reserves value was calculated based on the price of minerals contained in each company’s proven and probable reserves as of Oct. 30, 2020.
6“Financial institutions and private firms.” Tnfd.info, accessed on June 8, 2021.
7“JC 2020 16: Joint Consultation Paper: ESG disclosures: Draft regulatory technical standards with regard to the content, methodologies and presentation of disclosures pursuant to Article 2a, Article 4(6) and (7), Article 8(3), Article 9(5),Article 10(2) and Article 11(4) of Regulation (EU) 2019/2088.” Joint Committee of the European Supervisory Authorities, April 23, 2020.
8Sonter, L., Saleem, A., and Watson, J. “Mining and biodiversity: key issues and research needs in conservation science.” Royal Society, Dec. 3, 2018.
Further Reading
Biodiversity Threats from Mining (available on MSCI ESG Manager)
Oil Spill Risk and Biodiversity in the U.S. Gulf of Mexico (available on MSCI ESG Manager)
Investors Tackle the Biodiversity Crisis