We strive to apply ESG best practice across our business and therefore find it invaluable to benchmark our progress against our peers, nationally and internationally, to understand how we can improve our performance going forward.
Ratings agencies determine an overall ESG score based on publicly disclosed information (such as annual reports, websites, media publications and social media). A significant number of ratings agencies each uniquely measure the performance of organisations in terms of ESG.
One of the most well-known and widely referenced ESG ratings agencies is FTSE Russell, which publishes the FTSE ESG Index objective rating per organisation. The FTSE ESG Index Series is designed to help investors align investment and ESG objectives into a broad benchmark while maintaining industry neutrality.
The FTSE ESG Index is structured logically as a set of global indicators, which are in turn collated into 14 main themes that form the well-known ESG pillars. The final outcome at the top of the pyramid is a rating out of a maximum of five points.
As part of this assessment, each company is measured in a global peer comparison with other companies operating in the same supersector. Of the 14 themes covered by the FTSE ESG Index, 10 apply to Exxaro (listed below).
Themes applicable to Exxaro
The concept of materiality is at the core of exposure measurement with exposure contextual to the industry in which a company operates. For example, a mining company has much greater exposure to impacting biodiversity than a company operating in the banking sector. Exposure is classified in terms of a four-point scale.
Our ESG report has been deliberately structured to respond to the three pillars of environmental, social and governance for ease of access to information. Within the three pillars our ESG report discloses performance against the majority of the indicators under each of the 10 relevant themes.
Over the past five years, Exxaro's FTSE ESG Index score has improved steadily, moving into the top quartile of global performers in the basic resources supersector. Exxaro is currently in the top 22% of ESG performers. The steady improvement in the final ESG rating since 2015 is depicted below.
FTSE Russell ESG Index – Exxaro’s historical performance
As seen above, governance has consistently been the best performing pillar - these scores are measured out of a maximum of five hence a score of four equates to 80%.
When measured against global coal mining participants, Exxaro again demonstrates superior ESG performance (as seen below).
|Year end 2019|
|FTSE Russell ESG score||4.0||1.6|
We have taken note of the need to tirelessly strive to become better stewards of our resources, to minimise the impact we have on our environment, and to be mindful of the need to be a socially responsible organisation.
We have intentionally sought to better understand the levers to pull in order to maximise the positive impact we have on society with investors' search for a socially responsible mining company in mind. Investors want to see that sustainability is integral in the construction of their investment portfolios.
Companies operating in the fossil fuels sector are particularly subject to scrutiny. As such, we are aware of global sentiment towards fossil fuels and the need to make a just transition to cleaner energy. During the transition period, Exxaro will work towards achieving the highest possible performance in ESG.
We have taken the insights and formulated a more transparent ESG reporting strategy as we make progress towards improving our already highly commended ESG performance.