Jupiter Gold and Silver Strategy – Responsible Investment Charter
Our investment process seeks to identify well-managed companies engaged in activities related to the production of gold and silver. This Charter sets out what we believe to be some of the key attributes of a well-run mining company in relation to material Environmental, Social and Governance (ESG) issues.
We recognise that our investible universe includes companies of various sizes and stages of development and are willing to be pragmatic as to how our general expectations of governance apply, particularly with respect to smaller companies. However, as these companies grow over time we are keen to ensure that their approach remains suitable, and look to understand how their governance and strategy will evolve. Key areas that we consider include board composition, skills and independence, whether executive incentives are properly aligned to supporting and promoting long-term performance, and the extent to which boards have oversight of and responsibility for the key ESG issues facing the company.
The separation of ownership and control is often cited as a primary reason for not investing in a number of regions globally. Nevertheless, we recognise that, even within our universe (restricted to the Americas and Australia), companies may need to manage interactions with community-led organisations. While we understand that these organisations cannot be ignored, we expect our investee companies to operate and be governed in a transparent way in order to help us understand those who control the business and whether or not our interests are aligned.
We recognise the importance of effective taxation for mining extraction and the impact this can positively make to domestic revenue mobilisation, especially in developing countries, and when conducted correctly. To this extent, we endeavour to look at a company’s approach to tax and expect companies to manage their tax affairs in a way that reflects the economic realities of their business operations.
Mining companies are particularly exposed to environmental issues, due to the energy-intensive nature of operations, generation of large volumes of waste (some of which is hazardous), alterations to land impacting biodiversity, and use of chemical reagents and water required for processing activities. If managed poorly, the environmental impacts of mining activities can become material financial risks to companies.
We carefully consider a company’s performance on climate change, with a focus on energy sources, operational efficiencies to reduce GHG emissions and use of technology. We encourage the companies in which we invest to set longer term targets on how they transition to alternative fuel sources as their mine plans evolve. We also expect these targets to be linked to corporate strategy and executive compensation. Until hydrogen becomes commercially viable as an alternative fuel for haulage trucks in open pit mining, we are prepared to accept a reduction in emissions intensity to encourage new mining projects and facilitate growth. For projects in development, we expect companies to incorporate the latest process control technology into the mine design to maximise energy efficiency while reducing water consumption and waste.
The mining industry has an important role to play in the transition to a low carbon future. We recognise that a mine creates GHG emissions, but also provides materials for the transition to a lower carbon economy. For example, silver must be mined to enable the production of solar panels and batteries used to generate and store renewable energy. We consider the social elements of a company’s GHG reduction strategy in line with the principles of the Just Transition3 .
In addition to climate change, we consider a company’s approach to water consumption and discharge, tailings (mineral waste) management, and site remediation and management of biodiversity impacts. It is important that climate change is not viewed in isolation and instead all material environmental issues are equally assessed, especially as further exploration or development of a mine occur.
We expect companies to strive for best practice, going beyond local environmental permit requirements to ensure the highest level of risk management. We also look for company-wide risk frameworks such as an Environmental Management System, certified to ISO140014 .
Companies may operate in jurisdictions such as Canada and Australia where traditional owners have underlying claims to land. In these cases, we expect Impact Benefit Agreements , Social Economic Participation Agreements, and Indigenous Land Use Agreements to be structured towards financial participation, so that local communities and indigenous people benefit from the success of the mine. Our base expectation is that companies comply with requests from indigenous communities not to apply for or enact ministerial consent to destroy a heritage site, even if it goes against commercial interests. We see greater stability and reduced risk over the long term if heritage is respected and financial interests are aligned between the mining company, the government, and the local and indigenous people.
The governance of mineral resources is viewed with increasing importance by nations who rely on their extraction as a significant percentage of national income. As a result, companies that focus on maximising short-term shareholder profits over a longer-term approach of maximising the mine life may be viewed as exploitative. In severe cases, this could result in punitive taxation or even confiscation of the asset to the detriment of shareholders. We expect companies to carefully consider the benefits and risks of short-term decision-making, particularly as a more balanced strategy may lead to greater harmony with stakeholders and reduced risks to shareholders.
If through disclosure and engagement we are not able to gain comfort that these risks are being sufficiently managed, and in particular where we do not believe these risks to be adequately reflected in the market’s valuation of the business, we might choose to reduce our position or sell our holding entirely.
We review this Charter periodically to ensure it reflects industry best practice, and to inform our approach and engagement with the companies in which we invest.
2 The Ten Principles | UN Global Compact
3 IIGCC – The Institutional Investors Group on Climate Change
4 ISO – ISO 14001:2015 – Environmental management systems — Requirements with guidance for use
The value of active minds: independent thinking
A key feature of Jupiter’s investment approach is that we eschew the adoption of a house view, instead preferring to allow our specialist fund managers to formulate their own opinions on their asset class. As a result, it should be noted that any views expressed – including on matters relating to environmental, social and governance considerations – are those of the author(s), and may differ from views held by other Jupiter investment professionals.
Important Information
This document is for informational purposes only and is not investment advice.
The views expressed are those of the Fund Manager at the time of writing, are not necessarily those of Jupiter as a whole and may be subject to change. This is particularly true during periods of rapidly changing market circumstances. Every effort is made to ensure the accuracy of any information provided but no assurances or warranties are given.
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