Skip to main content
Much-needed transition towards clean energy depends on the mining industry.

When mining can be a responsible investment - our investment in Imerys

Carlota Esguevillas Carlota Esguevillas Responsible Investment Analyst

When mining can be a responsible investment - our investment in Imerys

Carlota Esguevillas

Carlota Esguevillas
Responsible Investment Analyst

It is well recognised that the much-needed transition towards clean energy depends on the mining industry. Minerals like cobalt, copper, lithium, manganese, nickel and zinc are required in large quantities to produce renewable energy technologies – from wind turbines and solar panels to electric vehicles and battery storage. According to the International Energy Agency (IEA), a concerted effort to reach the goals of the Paris Agreement would mean a quadrupling of mineral requirements for clean energy technologies by 20401

Yet mining for many of these resources has had a fraught history, and it continues to be associated with human rights violations and environmental damage including violence, child labour, poor working conditions, land rights abuses, pollution, and a lack of community participation. As such it is easy to think there is no place for any mining in a responsible and sustainable investment portfolio. Indeed, that is the position we have taken across the majority of the sector.

However, like most topics in responsible investment, the question of mining is not black or white. It is clear that we are increasingly reliant on the sector’s outputs as we seek to accelerate the energy transition, and we must balance the social and environmental impacts of mining with this need.

As Responsible and Sustainable investors, we place the highest emphasis on responsible business conduct including human rights, labour rights and environmental impact. When it comes to mining, we are particularly cognisant of the need for high standards and enhanced due diligence at every stage of the project lifecycle. Indeed, controversies, poor practices and ethical concerns have led us to exclude most companies with any mining involvement – with only one exception: a position in Imerys.

We recently went on site visit of the company’s largest China Clay (Kaolin) mine in Cornwall to find out more about how they operate as a responsible business.

Imerys - What do they do?

Imerys is a French speciality materials company which processes and refines mineral resources, synthetic minerals and formulations. It operates over 100 deposits throughout the world and mines and/or processes more than 30 different minerals including lithium, graphite, kaolin and talc. These are used by a wide range of industries including electric batteries, recycled packaging, construction and food production industries. As well as the supply of existing materials the company is involved in research and development of new products, processes and technologies, with a stated aim to provide more environmentally friendly solutions for customers.

The minerals extracted from mines owned by Imerys are also processed or synthesized by the Group, making it an integrated mineral solutions company rather than a pure-play mining company. In our view this sets it apart from ‘traditional’ mining companies which are more commodity focused.

What is the investment case?

There is an ever-increasing demand for specialty minerals and materials to meet the world’s needs for more sustainable solutions, and Imerys is well positioned to take advantage of this trend. For example, according to the IEA, demand for lithium is expected to see the fastest increase of any mineral – with demand growing by over 40 times. This is followed by graphite which is expected to see an increase of around 20-25 times2. Both are key minerals in Imerys’ portfolio: the company is the number one supplier of graphite conductive additives for batteries globally, and it aims to become Europe’s leading lithium supplier with plans to start lithium mining at its Beauvoir site in France by 2028.

Imerys is already the market leader in 75% of the markets it operates in and is growing its market share. Their operations are profitable and cash generative and it is trading on highly attractive valuation multiples. It has a strong balance sheet and is committed to the dividend as well as looking at share buybacks.

What is the responsible investment case?

As we have already touched on, the mining sector is fraught with environmental and social risks. From labour standards and safety concerns, through to the impact on biodiversity and water, there is much to consider before making an investment.

For instance, safety is a key concern in mining and therefore an area we looked at closely. Here the company demonstrated a strong H&S management system, a trend of reductions in lost time accidents, and an incident rate significantly below the industry average. The company’s focus is on technology use to reduce the risk. This was evident in our recent visit where only five employees were required to operate the entire mine, with the majority of processes operated and monitored remotely. Looking at employment more broadly, 73% of employees are covered by collective bargaining agreements globally – a useful proxy for good workforce rights.

On the environmental side, the company provides detailed disclosures of all key impact areas (water, biodiversity, emissions etc.), has aligned with key frameworks such as CDP and the Task Force on Climate-Related Financial Disclosures (TCFD), and has set a science-based emission reduction target. It is keenly focused on growing renewable energy use and reducing water use across all sites. For example, in Cornwall 60% of energy use is from self-generated renewables, and the company is working closely with the Environment Agency and the local water utility to reduce water use and improve river health.

There is also a strong ‘no waste’ approach across the business. For instance, in the Cornwall China Clay mines all by-products from the mining process (primarily sand and aggregates) are sold directly to third parties, who process it on site and sell it as a key input for construction. Indeed, a large part of the London 2012 Olympic Stadium was built with by-products from the mine we visited!

Biodiversity is another area of strength, and the company has a partnership with the French Museum of Natural History to ensure sites are managed with the best possible outcomes for nature. On our visit, we passed several old sites which had been ‘returned to nature’ and looked no different from the surrounding countryside! We were also shown the site of a joint venture with Eco-Bos Developments, where they are collaborating to build a sustainable housing community on previously mined brownfield sites. 40 homes have already been completed, with 6.5 million sqm of land made available by Imerys for further developments of around 5,000 sustainable homes in the region.

Lastly, our research found a very low level of controversies related to the company and its impact on social and environmental issues globally. This is rare for a business of this scale, and supports our view that it is operating responsibly and its negative impacts are indeed limited.

What stands out particularly?

In 2021, over 85% of Imerys’ revenues were aligned with three sustainability mega trends: sustainable construction, natural solutions for consumer goods, and green mobility & sustainable energy. The company is planning to continue focus and investment into these end markets, and has recently launched its SustainAgility™ strategy to support this aim. The SustainAgility™ framework assesses the application of the minerals and associated sustainability benefits (such as recycled packaging, batteries etc.) but also – importantly in our view – the environmental and social impacts of mining and manufacturing.

A product is deemed to have a positive, negative or neutral impact depending on the balance between sustainable value during the use phase and the environmental and social impacts of mining and manufacturing. Products and services are scored on two factors:

  • Sustainable value creation – the balance between the economic value created and the environmental damage involved in mining and manufacturing our products.
  • Market alignment – the level of sustainability-related benefits or challenges.

The company is committed to progressively steering their portfolio against this framework, with a goal for at least 50% of new products to be classified as A/A+ SustainAgility™ Solutions. This full life-cycle approach, focusing not only products which have sustainability benefits but also on their impact through production stages, underscores their position as a responsible player in the industry.