U.S. President-elect Donald Trump is no fan of ESG and looks set to try and reverse many aspects of it once in the White House, which will reverberate throughout corporate boardrooms across the country. 

In the area of natural resources, this raises serious questions over whether U.S.-based mining companies will play down the needs of host communities, particularly those in developing countries.

I argue any attempt by a mining company to do this will backfire badly – even under a U.S. administration hostile to ESG. More on the reasons for that shortly. 

ESG backlash 

The reality is that ESG is under attack in the U.S. 

Though not directly related to mining, some big U.S. corporations have been diluting their ESG initiatives, reflecting an increasingly strong backlash against climate change and diversity, equity, and inclusion (DEI) policies in some quarters of U.S. society. 

An article in Fortune magazine recently named Lowe’s, John Deere, Tractor Supply, and Harley-Davidson as winding down previous workforce diversity initiatives. The last two companies said they’re doing this to appeal more to their conservative-leaning customers. 

Domino effect?

None of this directly relates to the way mining companies treat communities living near their operations. But there is a risk that the backlash against ESG could negatively ricochet on corporate social responsibility (CSR). 

Also, if the Trump administration weakens the enforcement of the Foreign Corrupt Practices Act, this might tempt some U.S.-based companies to adopt more lax practices overseas. This could play out in developing countries where local laws on corporate accountability may be less rigorous making it easier to ignore the needs of host communities.

Gaining momentum 

The deepening shift against ESG in the U.S. comes as many senior mining executives are really starting to get on-board with ‘responsible’ mining. That includes decarbonising mining operations and taking better care of host communities.

An excellent piece in the Engineering & Mining Journal cited some research that found that only 29% of board members of mining companies feel knowledgeable enough to monitor sustainability practices effectively. That acknowledgement is encouraging. It suggests that the executives lacking proficiency in this area see this as a shortcoming that presumably they feel needs addressing. 

Indeed, more mining company board members are skilling up on topics such as social responsibility and implementing robust governance structures in their firms to bolster community host relations. 

Only the start …

However, as the Engineering & Mining Journal article points out many mining companies are still in the early stages of achieving high levels of social responsibility. Often issues are only addressed when conflicts arise meaning that the company’s approach to community relations is reactive rather than proactive.

Nonetheless, I am relatively confident that Trump’s presidency won’t lead to a serious degradation of host community relations from U.S.-based mining companies for two main reasons.

Tarnished image

These are public perceptions of mining and the attitudes of the financial sector. 

Mining disasters generate torrents of bad publicity for mining companies, which can badly tarnish their image with their stakeholders for many years. Related to that is a growing emphasis on traceability ensuring that materials are sourced in a way that is ethically and environmentally responsible. 

The other factor that I believe will discourage U.S. mining companies from deprioritizing community relations abroad is the attitude of financial firms. 

Money talks 

Last year, we commissioned FT Longitude to survey the views of institutional investors towards listed mining companies. It revealed that the impact of mining on host communities and human rights was their top concern, cited by 31% of respondents. Reputational risk was off-putting for 25% of respondents. These were all factors dissuading them from investing in the sector. 

This has left the mining industry struggling to convince many investors to buy their shares or their bonds. 

Meanwhile, banks have been retreating from mining for decades leaving only a small band of players willing to finance new mines. Any perception that mining companies are backsliding on their social responsibilities could spur more financial institutions to quit support for the sector.   

Reversing negative perceptions

These negative perceptions are choking off investment into a sector that supplies so many of the raw materials that are essential to the modern world. 

The mining industry still needs to rehabilitate its image with the financial sector and the public in general. Initiatives from the International Council on Mining and Metals and The Global Investor Commission on Mining 2030 are working hard to reflect the material improvements mining companies have made in CSR over the years.

It would be a tragic own goal if some mining companies used the Trump presidency as an excuse to backpedal on being responsible corporate citizens in the local communities they operate in – particularly in developing countries.