Client
Industry
Mining and minerals
Expertise
Climate change risks and opportunities
Impact
Paving the path for climate resilient mining operations.
Challenge
How can the mining industry futureproof itself and build climate resilience?
Copper, silver, aluminium, zinc and iron ore play a vital role in the green energy transition. They help produce the clean energy technologies required to keep 1.5°C within reach.
As demand for solar panels and wind turbines heightens, mineral production will soar. Yet, as a traditionally carbon-reliant industry that's open to climate risks, mining must futureproof itself and build resiliency. It is a sentiment that many investors echo.
Listed on the UK stock market, Mexico’s top producer of silver, Fresnillo, recognised this sentiment. The mineral and metal producer sought to better understand its climate risks and opportunities in the hope to strengthen its adaptability strategy and meet TCFD requirements.
Task Force for Climate-related Financial Disclosures (TCFD)
A disclosure framework for businesses and financial institutions to report on their climate-related risks and opportunities. It is a tool kit for companies to think long term and consider what climate change means for their business and value chain. TCFD-aligned reporting is already mandatory in the UK with more countries and regions expected to follow, including the EU, Colombia and the US.
Solution
A deep dive into Fresnillo’s climate-related risk exposure and opportunities
Fresnillo had already considered its climate-related risks and opportunities in previous reporting, but the mining company needed to dig deeper. To fathom the financial and operational implications of Fresnillo’s exposure to climate threats and opportunities, we:
Identified climate-related risks and opportunities along Fresnillo’s value chain in Mexico, covering the mining company’s full business model.
Uncovered the materiality of each climate-related risk and opportunity, assessing its probability and financial impact on Fresnillo’s operations. This helped set key priorities.
Assessed how Fresnillo can hone its climate risk-related reporting, identifying reporting gaps and priorities which should be addressed to meet the TCFD recommendations.
Our materiality analysis detailed the most pressing risks which should be addressed as well as the most promising opportunities. We identified that the mining sector as a whole faces similar challenges and opportunities:
- Public perception of the mining sector could impede investment at a time when the industry needs to meet production demand.
- ESG scores play a greater role, causing investors to tie their capital to companies that are best prepared to mitigate their exposure to climate risks and prepare for a low carbon future.
- Emerging regulations such as carbon pricing and new taxes on carbon- and energy-heavy operations will increase operation costs.
- From heavy precipitation to long-lasting droughts, extreme weather events are becoming more frequent and intense. It presents a growing physical risk to mines, as storms and water scarcity could interrupt mining operations and the supply chain.
Planning ahead for a low carbon transition also presents significant opportunities:
- A growing demand for solar panels and wind turbines, will lead to a surge in mineral demand and increase revenue.
- As green energy expands, clean energy sources will power mining operations, leading to lower energy costs.
Impact
Promoting more informed investment and business decisions
This project gives Fresnillo a fuller picture of how climate change is shaping the business. By getting a 360-degree view and aligning its reporting to the TCFD framework, Fresnillo can strengthen its adaptability strategy and:
Bolster the internal business case for some of the opportunities and incorporate these into its adaptability and operational strategy.
Reassure investors and other stakeholders that management understands its climate risks and is managing them responsibly to futureproof the business.
Improve Fresnillo’s credit rating through in-depth reporting that aligns with TCFD requirements and is backed up with granular data.
We want to ensure that our TCFD disclosures are as detailed and in-depth as possible. Because of this, we were particularly impressed with the team’s clear gap analysis of our reporting. It has enabled us to strengthen our reporting in line with TCFD requirements, fostering a more transparent investor dialogue on our climate-related risks and opportunities.
