Evaluating ESG Risk Ratings of Mining Companies: What Are Lessons for Ecuador's Developing Mining Sector?

Abstract

The growing interest of international mining companies in Ecuador has raised concerns about how these companies will manage environmental and social risks, particularly in Indigenous communities and fragile ecosystems. This study uses Sustainalytics' ESG Risk Ratings to examine variations of ratings with respect to country of origin and firm size. Our analysis suggests that OECD-based mining companies with operations in multiple countries and those with a larger workforce tend to have fewer unmanaged ESG risks compared to others. However, the analysis highlights that these relationships are non-linear and heterogenous potentially moderated by a variety of factors that require a sector and country-specific analysis. As more international companies bid for Ecuador's untapped mineral resources, more studies are needed to inform policymakers on how to design a mechanism to differentiate companies already facing higher risks or having a large amount of unmanaged ESG risk. More research is also needed to identify and design strategies to effectively communicate with local communities and investors and inform them of the extent to which mining companies are managing ESG risks.

Department(s)

Economics

Comments

Universidad San Francisco de Quito, Grant None

Keywords and Phrases

ESG indicators; Foreign direct investment; Minerals; OECD; Resources policy; Responsible mining; Sustainability

International Standard Serial Number (ISSN)

0301-4207

Document Type

Article - Journal

Document Version

Citation

File Type

text

Language(s)

English

Rights

© 2024 Elsevier, All rights reserved.

Publication Date

01 Jul 2024

Link to Full Text

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