Five ways mining businesses can build climate resilience

The decarbonization imperative is putting pressure on the mining sector. Driven by stakeholder pressures and changing exposures, future-ready metals and mining businesses are embracing five steps to build resilience against climate risk.

Climate change is driving the mining sector to think strategically

Climate change is impacting the extractives sector as businesses continue to:

• Appraise their role in a low-carbon future through mining the necessary metals and minerals
• Rebalance commodity portfolios and shift away from fossil fuels
• Drive to decarbonize their operations and supply chains
• Manage exposures to legal challenges associated with historical emissions, environmental degradation, potential “greenwashing” allegations, and directors’ and officers’ (D&O) insurance claims related to climate change
• Shore up the resilience of their assets, operations, and supply chains to the physical impacts of climate change

Mining investment decisions have long lead times and long-lasting effects. Future-ready business leaders are taking action now.

Priority actions for mining companies to build climate resilience

1. 01

   Build climate resilience into existing processes

   Building climate resilience is about integrating it within existing risk management and planning procedures. Leaders’ energies may be wasted in reinventing the wheel. From planning, to operation and maintenance, to decommissioning and closure, there are multiple opportunities for climate risk considerations to be integrated into existing activities so mining businesses can take a step on their energy transition journey with minimal disruption.

2. 02

   Identify climate sensitivities and critical thresholds

   The boundaries figure 1 shows that in a stationary climate, the boundaries between tolerable and intolerable levels of risk may be designed to tolerate infrequent breaches and their consequences. In the future climate, the threshold may be crossed more often and with greater intensity, leading to intolerable levels of risk. To ensure continued successful operation, adaptation would be required to increase the coping range (e.g. by raising the height of a dam spillway).

3. 03

   Stress-test strategies across future climate scenarios

   Mining and metals companies should explore a range of potential climate futures representing different global climate change mitigation ambitions. Generally, it is recommended that companies utilize low-, medium- and high-emissions scenarios that incorporate tipping points – critical thresholds beyond which a system reorganises, often abruptly and/or irreversibly. Without incorporating tipping points, businesses are likely to be underestimating the business impacts of a 2-3+ °C world.

4. 04

   Quantify risk

   Physical climate risks may lead to a range of business impacts, some of which are financially quantifiable (e.g. physical damage, business interruption, production loss, and costs), and others which are more difficult to quantify (e.g. brand equity, reputation, legal action, and compensation). Quantifying the potential financial impacts of physical climate risk should balance two robust approaches:

   • Probabilistic natural catastrophe (nat cat) models to consider the potential damages to property, contents, machinery and equipment, as well as the potential business interruption caused by the hazards
   • Scenario-based analysis – supported by climate data – to provide plausible ranges of impact in better, bad and average years

5. 05

   Stay agile when it comes to risk management

   Some risk management measures will be high-cost and complex (e.g. new infrastructure, or actions involving multiple stakeholders), while others will be low-cost and easier to implement (e.g. operational changes, capacity building, and training). The pathways support a decision strategy that can evolve and adjust as circumstances change, new knowledge emerges, or climate-related thresholds are met.

To find out how climate hazards are mounting for mining and metals companies, and how to prepare for a changing future, download the full article, below.