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The power of ESG on investors and … Mandrake defies this week’s market odds
6 minute read
ESG (Environment, Social, Governance) is now an essential part of business operations and it is having a major impact in investment circles.
In fact, it is safe to say that ESG has gone mainstream.
Companies are becoming increasingly aware of measuring the sustainability and ethical impact they makes.
And for good reason.
Responsible investing, particularly among millennials, is now factored into many investment decisions.
So much so, that global sustainable investment now tops $30 trillion - up 68% since 2014 and tenfold since 2004.
The term ESG was first coined in 2005 in the Who Cares Win study.
You can download that document here. It is essential reading for those looking at the history of change in the financial industry.
So, the concept has been around for some time. It is just adoption that has been slow.
According to Forbes, “Institutional investors were initially reluctant to embrace the concept, arguing that their fiduciary duty was limited to the maximisation of shareholder values irrespective of environmental or social impacts, or broader governance issues such as corruption. Incredibly, such arguments are still being made. But as evidence has grown that ESG issues have financial implications, the tide has shifted. In many important markets, including the US and the EU, ESG integration is increasingly seen as part of fiduciary duty.”
Given this change of sentiment, by 2018 over 80% of the world’s largest corporations were using GRI standards.
GRI (Global Reporting Initiative) is the independent, international organisation that helps businesses and other organisations take responsibility for their impacts,
According to GRI, “The Standards help organisations understand and disclose their impacts in a way that meets the needs of multiple stakeholders. In addition to reporting companies, the Standards are highly relevant to many other groups, including investors, policymakers, capital markets, and civil society.”
The shift gained real momentum around 2013 and 2014 when the first studies were published equating good corporate sustainability performance with good financial results.
Late last year, just to drive home the point, The World Economic Forum launched its White Paper Measuring Stakeholder Capitalism: Towards Common Metrics and Consistent Reporting of Sustainable Value Creation which called for a universal framework for ESG measurement.
This framework consists of 21 core and 34 expanded metrics and disclosures aimed at mainstreaming reporting and progressing toward a generally accepted international standard for ESG.
Companies can use impact monitoring technology such as Socialsuite, to periodically collect and report across these ESG metrics.
ESG adoption has never been more important, especially in a company’s bid to attract investors.
As this Forbes article concludes: “As corporations and investors experience growing influence and power, their actions and decisions increasingly shape the future. Provided that political framework conditions based on openness and global rules do not deteriorate further, market-led changes will act as a force for good on a truly massive scale.”
2 stocks to watch
While the market has been hit quite badly, there were a couple of stocks that came out with some market moving news.
- Mandrake Resources (ASX:MAN)
MAN is just a week or two away from a potentially company-making drilling program at the highly prospective Newleyine PGE-Ni-Cu target, part of its 100% owned Jimperding PGE-Ni-Cu Project in WA.
Drilling will start this month, with MAN to be the first ASX company to drill a Julimar-style EM target since Chalice Mining’s billion dollar Julimar discovery in early 2020.
Chalice is one of the top performing companies on the ASX after opening up an entirely new minerals province – the stock is up over 2,600% since January 2020, and now commands a $1.56BN market cap.
MAN is currently capped at $40M and is aiming to emulate a Chalice like discovery.
Mandrake has a solid week this week, despite the volatility beginning the week at 9.3 cents and ending at 16.5 cents. It is one company that has gone against the market grain.
- Thomson Resources (ASX:TMZ)
Thomson has been on an aggressive expansion strategy and this week added The Texas Silver Project in Queensland to its arsenal of silver assets.
TMZ is targeting a 100 million ounce resource base.
Its acquisition spree began in January with two transformational silver assets: the Webbs and Conrad deposits, which account for a resource of approximately 34 million ounce silver.
Just last week, TMZ entered into a binding and exclusive Term Sheet with White Rock Minerals Ltd, that would see it take a 70% stake in the Mt Carrington gold-silver project which has a 23 million ounce resource.
The Texas Acquisition now brings it closer to its 100 million ounce goal and expands its footprint into Queensland, giving it good ground in the NSW and Queensland border region.
Thomson is down this week, but so is the entire market. Still, as it continues to build its silver base, this remains one stock to keep on your radar.
The best and worst performing sectors this week
Energy is the best performing sector up over 4 per cent followed by Consumer Discretionary up over 1 per cent and Communication Services up just under 1 per cent. The worst performing sectors include Healthcare down over 2 per cent while Materials and Information Technology are down just under 1 per cent.
The best performers in the ASX/S&P top 100 stocks include Bluescope Steel and Stockland as both are up over 10 per cent followed by ANZ Bank and Alumina who are both up over 8 per cent. The worst performers include one of last week’s best performers IDP Education, which is down over 11 per cent, followed by Fortescue Metals down over 7 per cent and Evolution Mining and Northern Star Resources as they are both down over 6 per cent.
What's next for the Australian share market?
According to Wealth Within founder Dale Gillham, “The market has continued its pattern of closing higher one day only to fall the next, which is the pattern it has been in since the start of 2021. Currently, the market is up slightly for the week, although I suspect by Friday’s close the downward move will continue.
“If the market closes lower on Friday, it will confirm the last four weeks have been trending down, which adds weight to the argument that the market is falling into the low I was expecting a few weeks ago. As I indicated last week, this will be confirmed if the market trades below 6,770 points.
“If that occurs, then we need to be prepared that the current down move could unfold over the next four to six weeks into mid-April and for the market to trade down to below 6,500 points. Given this, now is not the time to be entering the market, instead you would be better sitting back and waiting for the next run up as there are many great stocks that will present excellent buying opportunities in the second half of this year.”