Environmental, Social, and Governance (ESG) may have finally peaked – at least in terms of its trendy corporate and investment culture narrative.
In May, leading electric vehicle manufacturer Tesla was dropped from the widely-tracked S&P 500 ESG index, all while oil-major Exxon secured a top-10 position and oil refiner Phillips 66 was added. For context, Tesla’s “ESG score” didn’t drop, other companies scores improved, overtaking Tesla. Tesla CEO Elon Musk frustratingly responded by Tweeting “ESG is a scam…it has been weaponized by phony social justice warriors.”
Aswath Damodaran, a professor of finance at the Stern School of Business at New York University and vocal critic of ESG, recently said “the mask is off ESG…it can’t be measured…(and now) companies like Exxon are (just) playing the game they were asked to play.”
We still need oil (which couldn’t be clearer than it is at the moment), we need mining to produce metals to produce batteries for green solutions, and although more discretionary, people still want natural diamonds (which was made very apparent last year, marked by record global diamond jewellery sales) – so, despite the nauseating hypocrisy of “commercial” ESG, having a framework for more sustainable business practices, especially for industries that most directly impact the environment, still holds value.
And, while the public light may have finally been shed on the opportunistic political and economic spoils of the movement, it doesn’t mean that some of the fundamental underpinnings of ESG won’t still have lasting, positive, real-world impact. The narrative did get people thinking about a fairer, more just society, conscious of the choices that our decisions could have on future generations, especially as it pertains to the environment.
Getting to the diamond industry, in recent weeks, De Beers, the world’s largest diamond miner by value produced – and clear industry steward, released its latest iteration of “Building Forever,” the company’s medium-term, relatively objective, “blueprint to a better future.”
Notable goals include, becoming carbon neutral across operations, providing the “origin and impact” of every diamond the company discovers and sells, and “supporting” four jobs for every one operational job in the countries in which the company operates – all by the end of the decade.
More specifically, the company is aiming to convert its truck fleet to hydrogen-fueled vehicles by 2030, an initiative De Beers’ parent Anglo American is leading. Last month, Anglo unveiled a prototype of the world’s largest hydrogen-powered mine haul truck – a 2-megawatt hydrogen-battery powered hybrid truck that generates more power than its diesel predecessor, allowing it to carry a 290-tonne payload.
Also, last month, De Beers announced that it is now using its diamond provenance “technology platform,” Tracr, to track diamonds “at scale.” Approximately, a quarter of De Beers’ production has been registered on the platform so far this year, which utilises “the blockchain, artificial intelligence, and the internet of things” to significantly increase the transparency of the diamond industry’s supply chain.
Importantly, De Beers has very publicly and clearly distributed its sustainability objectives, fairly setting itself up for scrutiny if it were to fall short.
Paul Zimnisky, CFA is an independent diamond industry analyst and consultant based in the New York metro area. For regular in-depth analysis of the diamond industry please consider subscribing to his State of the Diamond Market, a leading monthly industry report; an index of previous editions can be found here. Also, listen to the Paul Zimnisky Diamond Analytics Podcast on iTunes or Spotify. Paul is a graduate of the University of Maryland’s Robert H. Smith School of Business with a B.S. in finance and he is a CFA charterholder. He can be reached at email@example.com and followed on Twitter @paulzimnisky.
Disclosure: At the time of writing Paul Zimnisky held a long position in Lucara Diamond Corp, Star Diamond Corp, North Arrow Minerals Inc, Brilliant Earth Group and Barrick Gold Corp. Please read full disclosure at www.paulzimnisky.com.