May 2nd, 2022 | 11:32 CEST
Do not ignore ESG risks: Deutsche Bank, Ximen Mining, BYD
Table of contents:
"[...] If we pursue our goals conscientiously, the market will adjust its valuation accordingly, I am sure. Often, all it takes is a trigger. [...]" Ryan McDermott, CEO, Phoenix Copper
Deutsche Bank: Where did all the skeletons in the closet come from?
When Volkswagen's emissions scandal became public more than half a decade ago, insights into the management structure quickly emerged. Many responsible representatives of the Company had not known anything at the time. When information gets trapped, and there are secrecy-bearers within companies, there is a lack of good governance. The case at Deutsche Bank could be similar. Only recently, there was a search there because of failures in the fight against money laundering. Specifically, the issue is said to involve transactions by a family member of the Syrian despot Bashar al-Assad. Deutsche Bank has repeatedly come into conflict with the law in the past or - as in the current case - has at least been the subject of investigations.
The publicly available sustainability data from Morningstar Sustainalytics shows a medium ESG risk for Deutsche Bank. Compared with 1006 banks, the blue-chip bankers are ranked 515 - which is about as mediocre as it gets. Nevertheless, investors could take a closer look at banks' ESG performance. Deutsche Bank has demonstrated for years that even mediocre ESG ratings can mean serious problems. While the imminent turnaround in interest rates is boosting business, there still seem to be risks lurking within the bank itself. The constant problems surrounding investigations cannot be a coincidence.
Ximen Mining: Driving gold projects forward sustainably
The Canadian mining company Ximen Mining is also wholly committed to sustainable action. "As a mining exploration and development company, we are responsible for implementing green solutions and technologies in all of our operations whenever possible. We believe we are part of the solution that contributes to the survival of our industry and our planet," said CEO Christopher R. Anderson. Ximen Mining has several gold and silver projects and is actively advancing the development of the Kenville Gold Mine in particular. Most recently, it managed to obtain steel girders for the construction of the mine portal, despite general supply difficulties. The steel girders are part of rebuilding measures to provide on-site office and dormitory space for company employees.
Also, recently, Ximen Mining completed a capital increase of approximately CAD 1.3 million to fund ongoing work. Among those involved was CEO Anderson. The units were issued at CAD 0.15 and included a warrant at CAD 0.25 for 24 months. The share price has recently weakened in the wake of the capital measure. However, the previous 52-week low at just under EUR 0.10 could be a support in the long term.
BYD: ESG as the only catch
The fact that sustainability is playing an increasingly important role could turn into bad news for BYD. What sounds contradictory at first then sounds plausible when looking at the competition. Although BYD operates in a sustainable industry as an electric car manufacturer and energy storage professional and is also a technological leader, the competition is on the attack. In the EU, there are already plans to make the supply chains around e-car batteries transparent. For mining companies with weaknesses around ESG, this could become a disadvantage, as these weaknesses indirectly affect the ESG ratings of end products made from these raw materials. Chinese manufacturers, such as BYD, have always had access to low-cost raw materials - but ESG has hardly been a priority. If sustainably mined raw materials become a selling point, BYD could experience disadvantages. With its chip division and advanced batteries, BYD remains well positioned, but ESG risks still exist.
In a world that is constantly turning and in which sustainability is not only talked about but increasingly lived, companies must act. Examples from the media show that even large companies such as Deutsche Bank and BYD still have room for improvement. Every transformation is difficult, especially for large corporations. On the other hand, it is easier to set up young companies from the outset to be as sustainable as possible. Ximen Mining is a case in point. In the race for funds from investors, this could still pay off in the long run. The share is currently trading near its lows.
Conflict of interest
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