North America’s Critical Minerals Advantage: Deep Dive on Community Engagement

(Disponible en anglais seulement)

Remi Piet:

Having communities benefit from it, including elements of circular economy, for example, that creates local supplier opportunities. The Scope 1 to Scope 3 reporting is also a very strong incentive towards having a better performance. And when you're having a better performance on your climate impact, usually it's very much correlated with your social performance on the ground. So if you do things more locally, you will have a better performance in terms of ESG reporting.

Michael Torrance:

Welcome to Sustainability Leaders. I'm Michael Torrance, chief sustainability officer with BMO Financial Group. On the show we will talk with leading sustainability practitioners from the corporate, investor, academic and NGO communities, to explore how this rapidly evolving field of sustainability is impacting global investment, business practices and our world.

Speaker 3:

The views expressed here are those of the participants and not those of Bank of Montreal, it's affiliates or subsidiaries.

Susan McGeachie:

Hello, my name is Susan McGeachie, head of the BMO Climate Institute. Today we're in Florida at BMO's Annual Global Mining Conference where I'm joined by Remi Piet, co-founder and senior partner, Embellie Advisory. Remi is also a faculty member of HEC Paris in Qatar and the University of Miami, as well as a member of the Devonshire Initiative focused on community relations and social license to operate.

At this year's 32nd Global Metals and Mining Conference, the first to add critical minerals as a core theme, there was significant attention on the role of critical minerals in enabling the global energy transition, along with widespread agreement that the world needs to rapidly expand its supply of feedstock materials to enable economy-wide decarbonization. There was a prevailing concern over accelerating geopolitical competition for access to these minerals.

Producing the required level of critical minerals and metals including cobalt, lithium, copper, and nickel to meet soaring demand for battery and zero emitting energy technologies will be a challenge. The shape of the future global production landscape for these materials is still uncertain and will depend on how producing nations manage to stimulate and accelerate investment.

As jurisdictions endow with bountiful mineral reserves, the United States and Canada can leverage clear competitive advantages to be key suppliers of these metals and minerals with well-defined and aligned resource development strategies. We have the finance sector, we have the technical and experience knowhow, but there's a wide gap between expected demand for critical feedstock materials and available domestic supply. This means we'll either need to expedite possible projects that are in our pipeline today or fill the gap with imports.

This is what we're going to drill down on with Remi. Remi, thanks for joining us today. Perhaps we can start by you just telling us a little bit about yourself and Embellie Advisory and how it fits into this urgent global question.

Remi Piet:

Well thank you very much Susan, and first of all thank you for having me, always a pleasure to talk to you. Yes, Embellie Advisory was initially set up as an investment hub to channel investment out of the Middle East towards projects in emerging markets, especially in the energy and infrastructure sector first, and then gradually more into the natural resource sector also. We quickly understood that for a project to be efficient and for investors to actually have a return on their investment, we had to get a series of above the ground risk and understand them, clearly have an assessment of what those were and ensure a social license to operate at different projects.

So that means what? That means making sure that the projects are actually integrated into a vision of development for the territory, inclusive development that actually builds on community relations, integrate the right kind of ESG protocols for the project to actually happen. And that's why we developed that very strong expertise on working with communities, working with governments, either on community suppliers program, on ESG strategy, on the series of understanding how to make sure that the project can move forward and integrate the different partners on the same territory, which will allow there for the project to move forward.

Now we operating across Africa, across Latin America and obviously the Middle East with some of our partners being in Europe and North America.

Susan McGeachie:

Great. I really wanted to focus on that international experience as we compare it to what Canada and the US are doing. So if I talk about a national resource plan, Australia has implemented such a development plan that identifies lower and higher risk areas for development, so that the lower risk areas, with consideration to environmental sensitivities or social license to operate challenges or both, that the predetermined lower risk areas are prioritized in advance of what can be lengthy site by site assessments. At the Climate Institute we mapped out something similar for North America by overlaying development hotspots with critical habitats as well as community engagement and regulatory challenges. And this type of strategic planning doesn't mean you can't develop in those areas, but only that you're not finding out there is an issue with a critical habitat four years into the permitting process.

Overlaying environmental sensitivities, including the critical habitat areas, is the easy part. Far more difficult we found is to incorporate bespoke community needs into a national resource plan. Remi, you know my views on the value of a national resource development plan, do you think something like this could work in North America and I'm wondering how could we develop such a plan in a way that incorporates the needs of mirrored diverse communities, each of which would be impacted by this development in different ways?

Remi Piet:

You're making very interesting points by giving actually the example of Australia. What we have right now is a gap between the capacity to access critical resources for economic development of a series of region; especially in North America because of lack of financing, because of lack of support of early exploration projects. And so the clear needs here of those critical minerals and the lack of policy to be able to identify the ones with the legs to run and can actually be further developed. And those, as we were mentioning, include obviously an element of inclusive development and social license to operate.

Now, when you're looking at a national strategy for development of those resources, this is much needed to a certain level, this top-down approach of being able potentially to develop fast track permitting, to develop a series of identification of the project that make the most sense, that have the highest return on investment for the economy, but also for social wellbeing of communities. At the same time you have to couple it with a series of bottom-up approach, because even when we seen a series of countries that were quite ambitious in terms of their top-down national strategy plan, identifying key projects, and Colombia comes to mind as a series also of ideas in Europe that was similar to that, doesn't mean that you will build and foster the kind of consensus around the project also at the community level. And so that's where you have to get the two different tracks working hand-in-hand towards this.

The national resource development plan are identifying projects but also providing clear guidelines towards how to include committees, how to include some ESG elements and factors into the development of the project, and a series of on the ground work with communities themselves; socializing what mining is, socializing what could be the possibilities for a more holistic development scheme for the territory, moving away from a potential resource curse and breaking with this "not in my backyard" situation that we see, and which is understandable for people living close to the mining project. But having the capacity to explain to them, how they can also benefit from it, how they could be a better integration of project with other sectors and making sure that these could actually move forward. Answering therefore both the need for critical resources but also the very well understandable position from communities, and so implementing the right ESG here for the project to move forward.

Susan McGeachie:

You mentioned "not in my backyard" is a Nimbyism, which we hear a lot about in North America. What you described, is that really the solution? Do you think it's more of an impediment in North America versus other regions, or is it pretty much the same across the board and we can all learn from each other?

Remi Piet:

This is something which is across the board in most jurisdictions and obviously the needs sometimes for work, economic development, might be more pregnant in emerging markets than it is in Europe and North America, where you have other opportunities for jobs or others. And therefore, that kind of driver or incentive is less obvious in North America. But there is obviously, across the globe, these tendencies of wanting to have general clear guidelines towards security of suppliers and climate change mitigation. But as soon as it actually impacts your individual wellbeing, or being in the vicinity of the project, or having this maybe impacting your own economic wellbeing, obviously these reactions are completely understandable. And they are indeed across the board and maybe stronger sometimes in North America and Europe, and that's where it becomes very interesting to see the answers from the government on this.

We've seen very interesting strategies on critical minerals here in the US, in Canada, also in the UK. There are a few others across the globe in Europe, Australia and so on, that actually start to integrate very much so that question of community integration and territorial development. The Canadian ones especially, has a very strong component towards First Nation, which is very well understandable. And that's why we start seeing also on a series of projects, it's been more the case into more fossil fuels or projects that have [inaudible 00:09:27] clearly need to make the case on ESG and elements on their inclusion to inclusive development. But those structured towards having maybe trust for indigenous communities, have them as very minority equity partners, but they actually are part of the project themselves and therefore the proceeds of those projects can help benefit the social wellbeing, the health infrastructure and so on, decided by the communities themselves.

So that's something that we start seeing obviously in Canada. There's some elements and some similar projects around the globe, but there are some good best case practices that can be learned, especially even indigenous communities from Ecuador, Peru, Australia. There's very interesting pilot project that can be replicated, and thanks to the different strategy that we are seeing in North America, can actually be much more efficient than they are maybe in their countries of origin. So that's where probably here when you're looking at the different strategies on critical minerals, when you look at the ESG elements and inclusion of communities, you might actually see some clear progress into the near future, in North America specifically, because the framework is clearer now.

Susan McGeachie:

So, I just wanted to widen out these themes a bit to the idea of climate justice. I know we talk about social justice or environmental justice, at the BMO Climate Institute we're talking about climate justice, which is really the ability to leverage this economy-wide shift that we're going to experience in a net zero transition, to bring more economic opportunity to different types of communities. Can you talk a little bit about that? And your work with Devonshire Initiative, I think focuses on some of those themes. Can you talk about how important the climate justice piece is to the energy transition, and the project approval processes and permitting that we're talking about here?

Remi Piet:

On the Devonshire Initiative, it was one key example of how Canada sometimes has very interesting initiatives to move forward, it's actually been existing for several decades now. It's this work about having mining companies and First Nations and NGOs talking with each other in a closed room setting, Chatham House Rule. So nobody knows what has been said, who actually has said what, and you feel absolutely more free to discuss your worries and your objectives, and see also other companies or other communities what were their reaction to. So it's really this very closed door setting but also that allows a very free conversation. So, it's been very efficient in Canada and with a series of different companies that are part of it. Kinross was part it, Yamana, a series of others.

What we did is actually we did the same kind of work in Latin America. We have the ability to speak several languages; Portuguese, French, Espanol and others. Obviously in Africa, there are more local languages. To be able to integrate some of the views and discuss into this setting where we mediate those different positions. Because a lot of it is lack of understanding, a series of fears, series of worries and needing to have the trust system or the trust situation, where you can actually discuss these and get some answers from companies or get some interaction with communities. That's the Devonshire Initiative.

And Canada actually has been quite a leader on those issues. I mentioned a clear framework towards sustainable mining for example. There's a very clear ESG protocol, which is middle of the ground between companies and NGO's, communities' desires in terms of sustainability of projects. We're actually quite well fitted, and you're seeing that framework being adopted by a series of countries, Brazil most recently, but before Colombia, Argentina, Australia and others that went into this. That's where I'm saying, you have those clear frameworks.

Now, when you talk about social justice or just transition, in a concept of climate mitigation and energy transition, the whole question is to see how to move away from traditional fossil fuel, for example. It's even more pregnant in coal producing or coal using countries and jurisdiction. In Africa it's a big element in terms of looking at just transition for communities to be able to move away from traditional fossil fuels, and harvest and jump onto opportunities with the energy transition efforts. And so that's where obviously the community relations and the elements of climate change is very much linked towards being able to have a clear path towards transitioning from one to the next in a just grounding, so having communities benefit from it. Including elements of circular economy, for example, that creates local supplier opportunities. The Scope 1 to Scope 3 reporting is also a very strong incentive towards having a better performance. And when you're having a better performance on your climate impact, usually it's very much correlated with your social performance on the ground. So if you do things more locally, you will have a better performance in terms of your ESG reporting, but a series of other evolution that are similar to that. The local and working with communities is really much more performant in terms of ESG standards, in terms of climate change emissions.

Susan McGeachie:

I agree. I think there's so much opportunity actually to bring some of these communities on board, and I think some communities have very much benefited and been very active. I wonder if there are other communities, or may not be as engaged, and I'm wondering do you have a strategy to ensure no community is left behind?

Remi Piet:

So first of all, and we have to clearly mention that many, many companies are doing the right thing and a good job, or at least good intent to reaching out to different communities. There are also a series of impact which is harder to quantify sometimes, and some communities are just for their own decision, their own right, decide not to engage; those are situation [inaudible 00:14:58]. That's where having another partner on the ground can be most helpful.

We're seeing some work that we've done, for example in Peru, we've done in Mozambique, that we've done in different countries; especially in the case of Peru with Inter-American Development Bank, of working directly with women communities across the country to be able to analyze the impact of mining development on those communities. So it's not made by the mining sector, it's not made by the development, it's made on terms of academic, strong studies with the communities themselves. And that allow us to create new links to other communities that were actually outcast, not including into that entire process, and be able to provide some sound examples of how sometimes the mining sector can have benefited women empowerment, inclusive development, not far from the mine. And be able then to socialize those result, completely on a non-biased basis, to the other communities that sometimes don't want to be part of the process.

So it's obviously creating some of the bridges, but the bridges goes both ways. That means also that we need to be able to relay the fears and the preoccupations of the communities that didn't want to be part of the process, that have been rejecting for different reasons the mining development, that are not so much focused on global energy transition that demands the development of a, let's say a nickel-cobalt mine. And it's not their main focus. Their main focus is what is the future of the territory and what is the future for me, my kids, and the vision that we want to have in terms of our own development.

So that's where you need to be able to actually move away from the global large discourse to actually work step-by-step on creation of value through knowledge sharing, through training to different communities. Through basically also having a lot of work with anthropologists, with different key experts on social sciences, to be able to maintain the basis of societal structure in those communities that don't want to be part of... or are very worried about being part of such a project that's of modernization or for an investment whichever way you want to call it.

And so that's why you need to go the extra mile. And then the mining company is usually ill-suited to do so because it is clearly labeled as a mining company and they need to actually pass through real experts on the ground to integrate those different communities. And those that already integrate in the process, to actually have some kind of a mediator or person in between that they can trust, rely on; pass a worry, pass a concern, without feeling that it will be outcast by the mining companies. That's why it's very important sometimes to use the right assets, the right tools, the right allies, in those different conversations with the objective down the road of having a holistic, diversified economy and social development in the area of influence of the mine.

Susan McGeachie:

This is such an interesting conversation in terms of this is a global issue, so we need these metals and minerals to have this global energy transformation, but then we have to get right down at community by community by community to bring them all on board. So, such a challenge-

Remi Piet:

And you have the same thing on the ESG standards also. And those are global ESG standards, they are well-built and so on, but the question and the objective is actually to [foreign language 00:17:54], to just bring it back on the ground, to adapt it... without cheating away from it, but to adapt it to the reality of the specific community. So clearly there's objectives in terms of quantified objectives, there's clear KPIs, but you need to be able to speak the correct language, you need to be able to open the right doors, to be able to explain it and localize the impact and seeing how to move forward on local grounding, and then report to global leaders those standards and performances.

Susan McGeachie:

Indeed. So last question, and I'll bring it back up to the global objective that we have. From your international perspective, do you feel that the US and Canada are on track to building a sufficient consensus to produce the minerals we need for this transition?

Remi Piet:

So that was the main topic of our panel yesterday. Do we have a competitive advantage here in North America to be able to phase that energy transition and to be able to have access and produce critical minerals, and EV batteries and others? My answer was, in terms of the technological knowhow, in terms of the financing capacities, "Yes, it's there." Although we should not forget that other countries are doing great efforts. Saudi Arabia, for example, is investing very large amounts of energy and money into that sphere also. So the US is not by all means alone on this, on having this strength.

Now, the issue is the access to the different resources. There's a lot of interest in critical minerals, resources in Latin America, in Africa for example, where the objective of the country is obviously to also build their own industry, to move away from the resource curse and dependency theory of Albert Hirschman, 1972. But that's to move away from that dependency from the First World, if I can actually call it this way. And so there needs to be better work done in terms of diplomatic relations with those countries in terms of building capacities in those countries also, and continue having them part of the North American attempt at achieving energy transition.

When it comes to continued access to resources, apart from the African and Latin American resources, there are obviously here in North America some clear possibilities to produce critical minerals. As I said, there was limited by the absence of early entry capital for early exploration projects. And that's where we need to be very clear in terms of how those minerals can be produced and under which conditions. So that is clarifying again the ESG framework, in terms of the deferment of projects, socializing the positive externalities and then explaining and mitigating the risk of negative externalities of a mineral production scheme.

And also clearly identify those projects that might need to have a fast track, and that means additional support from the government or additional support and presentation to the different communities. And with a series of different KPIs that includes, First Nation integration in the case of Canada, or other communities, but also clearly have the objective of build on those projects that have a potential to be part of the transition and link it with the entire value chain of the critical mineral processing. So that means building factories close to the reserves for example, and being able also to train the local communities to become potentially workers from the factories or becoming members of the mining communities.

A lot of mining companies already do it well. Sometimes there need to be an understanding that you might want to have allies and third parties to process and facilitate the process more easily, but they understand it. It's easier for large companies than it is for smaller exploration companies because it has a cost. It has to be done quite early in the process to socialize the project, to work on the ESG standard from the get-go, but is absolutely needed both for [inaudible 00:21:30] to sell that product eventually and for the mining companies and larger players to actually develop the project and move forward. And in their capacity to have those key steps in terms of, as I said, inclusion of project, inclusion of ESG format and norms into the critical mineral development, is the source of the success whether or not North America is going to be able to lead the pack towards the energy transition and be competitive.

Susan McGeachie:

Thank you so much, Remi. This is Susan McGeachie and I've been talking to Remi Piet. Thank you Remi again for joining our Sustainability Leaders podcast. It was a pleasure to speak with you.

Remi Piet:

It's always a pleasure, Susan. Thank you.

Michael Torrance:

(Disponible en anglais seulement)

Thanks for listening to Sustainability Leaders. This podcast is presented by BMO Financial Group. To access all the resources we discussed in today's episode and to see our other podcasts, visit us at bmo.com/sustainabilityleaders. You can listen and subscribe free to our show on Apple Podcasts or your favorite podcast provider, and we'll greatly appreciate a rating and review and any feedback that you might have. Our show and resources are produced with support from BMO's marketing team and Puddle Creative. Until next time, I'm Michael Torrance. Have a great week.

Speaker 3:

The views expressed here are those of the participants and not those of Bank of Montreal, its affiliates or subsidiaries. This is not intended to serve as a complete analysis of every material fact regarding any company, industry, strategy or security. This presentation may contain forward-looking statements. Investors are cautioned not to place undue reliance on such statements as actual results could vary. This presentation is for general information purposes only and does not constitute investment, legal or tax advice, and is not intended as an endorsement of any specific investment product or service. Individual investors should consult with an investment tax and/or legal professional about their personal situation. Past performance is not indicative of future results.