S&P Assigns Fortescue Metals Group ESG Evaluation Of 66; Preparedness Strong

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S&P Assigns Fortescue Metals Group ESG Evaluation Of 66; Preparedness Strong
mohamed_hassan / Pixabay

S&P Global Ratings has assigned Fortescue Metals Group Limited (ASX:FMG) an ESG evaluation score of 66. The company is the fourth-largest iron ore producer globally, with 182.2 million tonnes shipped from its three mining hubs in the Pilbara region of Western Australia during the year ended 30 June 2021. The score reflects Fortescue’s robust ESG management practices and strong ambition to lead the industry toward decarbonisation, while also taking into consideration the mining industry’s significant exposure to environmental, climate, social risks. Notably:

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Fortescue's ESG Score

Fortescue’s ‘E’ score (43) reflects the company’s efforts in establishing an industry-leading target of achieving carbon neutrality on its direct operations by 2030. As an iron ore producer, Fortescue has high exposure to downstream greenhouse gas emissions (GHG) from steel producers, but its GHG emissions intensity, normalised by revenues, is already lower than industry peers. Meanwhile, the company’s recycling rates are higher than its peers after shifting towards a circular economy and plastic reduction.

The company’s ‘S’ score (57) reflects the robustness of Fortescue’s policies and culture being translated into strong safety performance in its operations, as demonstrated by near 100% participation rates in its latest annual Safety Excellence and Culture Survey. Through its Social Investment Framework, Fortescue also articulates its community investments in creating employment opportunities for Aboriginal people and in health and education.

Fortescue’s ‘G’ score (71) is a reflection of its nine-member board which consists of relevant and diverse backgrounds, as well as separate chairman and CEO roles. Board average tenure is healthy at about seven years, and female representation of 44% is higher than the 32% average for its Australian peers. The company’s code and values are also well articulated throughout the organisation, and its disclosure and reporting practices are in line with international best practices.

The company’s strong preparedness score reflects Fortescue’s ability to remain resilient to disruptions as the world moves toward decarbonisation to meet global climate ambitions, the energy transition accelerates, and the scrutiny on mining companies’ social and environmental impact grows. In S&P’s view, the company board has an acute understanding of the material risks that Fortescue faces, and has deeply embedded sustainability objectives in its strategy. This is demonstrated through Fortescue’s deployment of US$700 million since 2019 toward establishing its renewable energy infrastructure – Pilbara Energy Connect and the Chichester Solar Gas Hybrid Project.

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