ESG Focus: ASX200 Off And Running, Part 3

ESG Focus | Mar 29 2022

FNArena's dedicated ESG Focus news section zooms in on matters Environmental, Social & Governance (ESG) that are increasingly guiding investors preferences and decisions globally. For more news updates, past and future:

ESG Focus: ASX200 Off And Running Part 3

February reporting season proved a watershed for ESG as steel and aluminium producers announced plans to decarbonise, mining services companies realigned their priorities to ESG revenue streams to support their major clients, and scrap metals companies kicked into gear.

-Green revenues favoured over straight decarbonisation
-Mining services companies sharpen ESG focus
-Scrap metals companies kick into gear

By Sarah Mills

One of the major ESG themes to emerge from the February reporting system was a broad shift among ASX200 companies to develop or buy green revenue streams.

Analysts believe critical mass is growing and markets should start to witness serious innovations within the next few years now companies are starting to get their strategies in place.

In Part 2 of this article, we noted South32 ((S32)) planns to decarbonise its Brazilian smelter, generating green aluminium revenue by 2023; that Fortescue Metals' ((FMG)) Fortescue Future Industries purchased the largest renewables energy generation company in the southern hemisphere, and that Alumina ((AWC)) was building its green aluminium revenue and Rio Tinto ((RIO)) pledged to decarbonise Tomago's aluminium production (albeit not until 2029).

This article looks at the Bluescope Steel's ((BSL)) ambitions (it is yet to generate any green revenue of note) as it did make some interesting announcements during the period; and then switches focus to the mining services industry and metal recyclers.

We address divestments, M&A and circularity in Part 4 of this series.

Bluescope Steel Airs A Plan

Bluescope Steel last year announced a 2050 net zero target with interim goals at 2030, and said it was starting to embed decarbonisation into its strategy, in which green steel production through hydrogen and renewable energy will play a part.

The announcement would have been considered the bare minimum from the ESG investment community at this stage of the game. 

The company has allocated $150m over five years to the task and the expects a total of $300m to $400m will be required over ten years.

In October, the company announced a partnership with Rio Tinto to develop hydrogen-based green steel through a direct reduction iron melter. A breakthrough on this front could possibly bring the company into the ranks of green-revenue producers, but the timeframe at this stage is unclear.

During the half, the company also signed memorandums of undertanding with Shell Energy Operations to explore and develop renewable hydrogen projects, which include projects at BlueScope's Port Kembla Steelworks, including a pilot renewable hydrogen electrolyser plant and an Illawarra hydrogen hub concept.

In our previous article we noted a breakthrough in the commercialisation of hydrogen technology, which could comfortably bring the price of hydrogen down to $2/kg, illustrating solid development on the hydrogen commercialisation front.

While green steel is the main game for the company, it has been working on treatments to it Colorbond roofing products that may enhance solar rooftop generation.

The company has also said it will be turning to the carbon offsets market - not ideal.

Investors will be keeping a keen eye to the pace of progress on the green steel front but at this stage, the company's progress is uninspiring.

Mining Services Companies sharpening ESG Focus

There were a slew of announcements from the mining services sector in the February reporting season.

Worley ((WOR)) committed to spend $10bn over three years to improve its sustainability and plans to increase the percentage of sustainable business to 75% within five years from 32% now: clear, verifiable targets that are likely to be appreciated by the ESG community.

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