ESG ratings in the mining industry: Factors and implications

Abstract

While previous research explores the relationship between ESG ratings, firm size, and financial outcomes, there is a lack of comprehensive analysis comparing multiple ESG ratings within the mining industry. This gap is crucial given the increasing focus on ESG in mining operations and its potential impact on company performance. Based on proprietary financial and ESG ratings data from 200 mining companies, this study investigates the relationship between two different ESG ratings and firm characteristics. We compare ESG-rated firms with unrated firms in terms of firm size, and financial performance indicators, and explore country-level patterns in ESG ratings. Findings reveal that ESG-rated mining companies are generally larger than unrated firms but neither more profitable nor face lower debt costs. The results also show that, among rated firms, larger mining firms have more favorable ESG ratings than smaller ones. However, we fail to find a correlation between ESG ratings and financial performance. Finally, the evidence suggests that mining companies rated high for unmanaged ESG risk are likely to have lower ESG scores. This research contributes to understanding whether and how ESG ratings could impact investment decisions and risk management strategies in the mining sector.