Companies, investors act on sustainability goals

Sustainability has moved to the top of many company leaders’ priority lists, driven by investor and public sentiment, as well as increasing pressure from across the world.

While that dirty C-word lingered on through 2021, another contender entered the ring towards the end of the year.

By October, with COVID-19 fatigue well and truly set in, tongues were wagging about another term that started with C and ended with numbers: COP26 – the 26th United Nations “Conference of the Parties”.

The conference, which had been delayed a year because of the pandemic, was the first time since the Paris Agreement of COP21 six years earlier that nations were expected to make enhanced commitments towards mitigating climate change.

The result of COP26 was the Glasgow Climate Pact, negotiated with representatives of the 197 attending parties. One of the big ticket items was coal – with the pact being the first global climate deal to explicitly commit to reducing the use of the fossil fuel.

Of course, the outcome was not what many nations had hoped for, with India urging that the language on a coal deal be tempered to enable the growing economy’s coal-fired ambitions to continue. China was on board, quite explicitly, to back the change in terminology from “phasing out” to “phasing down” the use of coal. Australia sat on its hands while the rest of the world pushed for change, but much to the chagrin of other developed nations, the Federal Government claimed another victory for the Australian coal industry.

Nevertheless, COP26 was very much the icing on the cake of a year that has focused strongly on climate action, and a range of broader sustainability issues driven by public expectations and changing investor appetites.

Company CEOs were put on notice at the beginning of the year by Larry Fink, head of the world’s biggest asset manager BlackRock.

″Because better sustainability disclosures are in companies’ as well as investors’ own interests, I urge companies to move quickly to issue them rather than waiting for regulators to impose them,” Fink wrote in his annual letter to CEOs.

When people like Fink speak, the business and investment worlds tend to listen. Obviously, he wasn’t the only catalyst for change, but 2021 was a year in which organisations sprang to action.

Mining and energy sector organisations have long had a reputation of hiding behind favourable Australian government regulation and legislation – or lack thereof – to deliver massive profits without the same limitations imposed on other sectors.

But we saw a definite shift over the past year even without regulatory intervention. From major mining and oil and gas operators to small explorers and service providers, companies started showing that sustainability was high on their agendas in 2021.

ASX-listed Carnarvon Energy (ASX:CVN) changed its name from Carnarvon Petroleum to rid itself of an increasingly ugly word. In spite of making one of the largest oil and gas discoveries in decades at its Dorado field and advancing plans to drill for oil at the Buffalo field in Timor L’Este, the name change added further weight to the company’s concerted sustainability ambitions, which include a joint venture development with Frontier Impact Group to establish a biorefinery that will produce renewable diesel and other high value products.

The move is just one example of the ways in which organisations – and in some cases whole industries – are viewing the move towards carbon zero futures. While some oil and gas producers may have thrown their hands up and declared they’ll make hay while the sun shines (or sets as the case may be), Carnarvon mapped a path that still includes development of its oil and gas assets, albeit in the most sustainable ways possible, and a longer-term shift towards renewables.

For advanced materials company First Graphene (ASX:FGR), the global shift presents significant opportunities for its carbon-based product. Graphene provides multiple benefits that help extend the life of products, provide better protection against fire, reduce water and chemical ingress, not to mention increasing strength, flexibility, and electrical and thermal conductivity.

Among several key initiatives, First Graphene has devised ways in which the wonder material can assist cement and concrete manufacturers to reduce their carbon emissions by 20 per cent or more – a timely move given the Global Cement and Concrete Association’s decree to reduce global carbon emissions by 25 per cent over the next decade.

There are other moves of a sustainable nature at play for First Graphene too. Earlier this year, the company announced it had acquired the patents to a process it helped develop that uses cavitation to convert petroleum feedstocks to graphene, high purity graphite and green hydrogen. The graphitic products are in high demand for use in batteries and other electric vehicle applications, while green hydrogen provides a potential source to self-power the conversion process.

The process eliminates combustion from the petroleum to energy conversion process and if successful, will provide a path for those refinery operators to transition to clean energy markets.

Added to that, the company’s clients such as NewGen Group launched graphene-enhanced products to market that capitalise on the multiple benefits the material delivers. That included newGen’s wear liners for the mining industry, which in field trials lasted up to seven times longer than standard products.

Mining services provider Elastomers Australia, which provides rubber and polyurethane screening panels to the mining industry, recently announced a partnership to help miners recycle rubber products. That extends beyond the company’s own screening products to include tyres, old conveyer belts and various other rubber products. The rubber is put through a low emission recycling process to produce carbon black, oils and gases – as well as to reclaim any steel reinforcement used in the products. These materials can be returned to manufacturers for re-use, creating a circular economy that ultimately assists the mining industry to reduce and reuse rubber waste.

And the year also saw major miners such as BHP, Rio Tinto and Fortescue Metals Group announce ambitious targets and major initiatives to eliminate carbon from their operations. That ranges from building solar and hydrogen-fuelled power plants, to working with equipment manufacturers to crack the secret to fully renewable-powered haulage equipment.

On top of all that, investors started backing companies focused on renewable markets. The battery minerals sector was a poster child performer in terms of share price growth on the ASX, with the likes of newcomer lithium miner Winsome Resources seeing 70 per cent growth on its IPO price in the first week of trading.

Alongside lithium, a host of other previously much-hyped but underperforming metals finally saw some light, as did rare earths.

Even uranium – that clean energy provider with a dirty past – returned to investor favour in 2021, as the commodity reached a near-decade high in September and has continued to perform strongly. Japan has announced it will recommission 30 nuclear power plants, while China is pinning its climate goals almost entirely on nuclear energy, announcing intentions to build 150 new plants over the next 15 years. So it’s been good news for listed uranium companies and those still on the listing calendar, such as West African focused uranium and gold hopeful Haranga Resources, which is due to debut on the ASX before Christmas.

However, 2021 is likely to be the mere tip of the sustainability iceberg.

Customers, investors and broader society will continue to demand action, and organisations will have to deliver.

The few remaining deniers will find themselves sitting on a very different kind of iceberg. And it will be melting rapidly.