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London’s gold market demands green credentials for producers

London’s gold market demands green credentials for producers

Wed June 13 2018


The world’s biggest producers of gold will have to prove their green credentials if they want their metal to be traded on London’s $5.5tn-a-year bullion market.


Under the new standards being introduced by London Bullion Market Association, refiners and miners will have to provide data on a range of environmental benchmarks including energy usage, pollution, water usage, carbon emissions as well as health and safety.


If miners or refiners do not meet the new guidelines that will begin next January, they face the prospect of being removed from the LMBA’s Good Delivery List, effectively shutting them out of the London market. The list of 70 approved refiners accounts for 90 per cent of annual global gold production.


The move comes as investors and banks are facing growing scrutiny over the environmental impact of their portfolios. At the same time, consumers of precious metals increasingly want to know where their metal comes from and to ensure it is ethically sourced.


The London Metal Exchange, the world’s largest trading venue for industrial metals such as copper and aluminium, is also set to launch responsible sourcing guidelines in the next few weeks.


Refiners on the LBMAs Good Delivery list are already required to ensure that their gold comes from sources that are free of conflict and are not connected to money laundering, terrorist financing, or human rights abuses such as child labour.


LBMA chairman Paul Fisher, a former member of the Bank of England’s Monetary Policy Committee, said the changes would ensure that gold in the city comes from sustainable sources.


“For the sensible majority there’s no reason why gold couldn’t be a permanent part of a sustainable portfolio,” Mr Fisher told the Financial Times. “That’s the mission. We need to make sure people know about that and that the industry is justifying that position.”


Gold mining generates about 20 tons of toxic waste for every 0.333-ounce gold ring, according to Brilliant Earth, a producer of ethically sourced jewellery. The use of mercury in small-scale gold mines can also pollute the local environment.


Freeport-McMoran’s Grasberg copper and gold mine in Indonesia, the world’s largest gold mine, has been dumping most of its waste into a local river for 20 years. While legal under Indonesian law, this has been criticised by environmental groups and placed the company on black lists for many investment funds.


There is some $300bn worth of gold in London’s vaults, the largest stash of gold after the entire holdings of the US government. The gold backs popular exchange-traded products such as the SPDR Gold Trust, the largest gold ETF.


“The risk is that the producers get lumped in with the fossil fuel extraction industry as one of the threats,” Mr Fischer, who was also a member of the EU High-level Experts Group on Sustainable Finance, said.


Source: https://www.ft.com/