Gold may not be an obvious choice for sustainable investment portfolios but there are compelling environmental and social reasons to back gold, said John Mulligan, climate change lead and director of market relations at the World Gold Council.
In this video interview, he shares how gold can assist in the decarbonization of frontier and emerging economies – as well as play a part in the just transition – how to avoid greenwashing and the book that helped him discover the carbon footprint of his favorite beverages.
Watch the full video interview above or the transcript is below.
NK: Gold is probably not an obvious choice for an ESG portfolio, but how is gold relevant in the context of decarbonizing the economy?
JM: So first of all, it may not be obvious, but I think there’s some compelling arguments for gold as a sustainable investment. Whenever you’re looking at physical-backed assets, you’re looking at responsible sourcing – the provenance, where they come from. Obviously, as you say, we’re looking at climate impacts and where does the asset fit in terms of decarbonization and decarbonization actions.
And then we have issues to do with wider impact; wider social and economic impact. And actually, gold can say something positive about each of those.
In terms of decarbonization, you’ve got a very basic concept. Bullion and bullion by-products aren’t associated with further accumulation of emissions, that’s quite rare, there are very few assets out there that don’t accumulate further emissions.
Furthermore, in terms of decarbonization of the supply chain, actually gold has some very positive impacts because if you decarbonize gold mining, potentially you decarbonize the whole value chain. And that’s quite unusual for, again, for any asset and certainly for any mined product.
NK: Greenwashing is a big concern, regardless of what asset class you’re investing in. How can investors avoid greenwashing when investing in gold?
JM: Well, I think when investing in any product, investors are obliged to do some due diligence. Fortunately for gold now there is a set of interlinked standards that can be queried – you can ask for evidence of proof points. So from the sourcing perspective, you have the Responsible Gold Mining Principles. From the refining perspective, you have the London bullion market’s Responsible Gold Guidance.
And those two kind of interlink so that investors and consumers of all physical gold products can basically check where the gold comes from and that it is produced and supplied to very high standards of ESG. There is the sense of provenance and responsible sourcing, and I think that’s key, you need to ask the questions. We’ve also published something called the Responsible Gold Investment Principles, and that’s to guide both investors and consumers to say these are the questions you should ask.
I think investors and consumers are right to ask questions and to avoid this threat or risk of greenwashing.
NK: How would you say the World Gold Council is playing a part in the just transition? You talked a bit about social impact before.
JM: I think the just transition on a global sphere is, for me at least and for as it relates to gold, is a question of how developing and frontier economies can both move to decarbonize whilst protecting the prospects for economic growth and also contribute to adaptation resilience, to make them robust against physical impacts.
Now, a lot of the countries and regions in which gold is produced are actually fairly limited in terms of capacity, and in terms of their ability to initiate that transition. It often means that if gold is to decarbonize, actually it will assist in decarbonizing that local economy. And if you look at a lot of frontier or developing economies such as Burkina Faso, the DRC [Democratic Republic of the Congo] or even South Africa, what you see is that it’s been the gold production process, and gold mining in particular, that has brought and prompted renewables.
Otherwise, that renewable infrastructure probably wouldn’t happen, and we would still be waiting for decarbonization. So actually, the gold value chain could quite significantly contribute to decarbonization.
NK: We always end the Green Dream with this question; what is your favorite sustainable drink or snack?
JM: So I brought a prop.
NK: Oh, amazing.
JM: I know you ask this question, and if anybody is interested in answering that question, I recommend Mike Berners-Lee’s excellent. How bad are bananas? Subtitled The Carbon Footprint of Everything. And for me, there are two aspects to this, I’m a drinker and tea is a relatively low carbon drink unless you add dairy milk, which is higher carbon.
If, however, you’re a latte drinker, a milk-based latte drinker, the carbon footprint of your latte, particularly if you buy it in a large disposable cup, is probably ten times the carbon footprint of your tea. Which makes me sound all virtuous and smug. I’m also a beer drinker, and unfortunately a pint of beer is considerably higher in terms of its carbon footprint than even a latte.
So be aware and check the carbon footprint of everything.
NK: Well, thank you very much for bringing that into show. Thank you for your time.
JM: My pleasure.