Case study: Engaging with the mining sector on employee wellbeing
The mining sector has long lagged behind others when it comes to diversity and inclusion, not least with female representation on boards. After a series of unacceptable workplace incidents, how did abrdn engage with boards of investee mining companies to drive positive change?
The rising importance of Diversity & Inclusion (D&I)
The idea that fostering a diverse culture within businesses can enhance long-term performance is not new. Encouraging access to jobs, particularly leadership roles, to a wider pool of talent makes sense, not least because businesses can tap into a greater range of thinking, while better representing their existing and potentially new customers.
According to a recent report by the World Economic Forum (WEF) and consultancy firm McKinsey, titled Global Parity Alliance: Diversity, Equity and Inclusion Lighthouses 2023, D&I initiatives amounted to a $7.5bn global market in 2020. By 2026, that market is set to grow to $15.4bn.
According to a recent report by the World Economic Forum (WEF) and consultancy firm McKinsey, titled Global Parity Alliance: Diversity, Equity and Inclusion Lighthouses 2023, D&I initiatives amounted to a $7.5bn global market in 2020. By 2026, that market is set to grow to $15.4bn.
Leaders and laggards
Much of the effort of D&I initiatives has focused on pursuing gender parity and increasing the number of women in leadership roles. While some industries have led the way, others have fallen short.
Last year, the WEF reported that global gender parity in leadership roles across all industries was 42.7%, having risen steadily over the last five years. Industries like education, healthcare, services, and media all had the greatest share of female leaders.
However, heavy industry, including traditionally male-dominated sectors like construction and mining, lagged far behind the average. Mining had just 12.1% of high-ranking executive roles occupied by women.
While the progress made by some sectors is to be welcomed, the relatively poor performance of ones as integral to the global economy as mining is a cause for concern.
Last year, the WEF reported that global gender parity in leadership roles across all industries was 42.7%, having risen steadily over the last five years. Industries like education, healthcare, services, and media all had the greatest share of female leaders.
However, heavy industry, including traditionally male-dominated sectors like construction and mining, lagged far behind the average. Mining had just 12.1% of high-ranking executive roles occupied by women.
While the progress made by some sectors is to be welcomed, the relatively poor performance of ones as integral to the global economy as mining is a cause for concern.
The problem: no consequences for bad behaviour
The solution: a clear diversity strategy
Voting standards
A key part of abrdn’s engagement strategy is voting. Proxy voting enables abrdn to hold boards and management teams to account and is a vital tool for escalating issues.
The scale of abrdn means that stakes in large businesses carry big sway. If abrdn votes against the board of a major company, the press will take notice. By doing so, boards will get the message that action needs to be taken to address the concerns of their shareholders.
This year, abrdn announced new voting priorities for a range of issues. Underpinning them is abrdn’s commitment to using accountability to influence firms, says Andrew Mason, abrdn’s Head of Active Ownership. “As an asset manager, we have a clear mandate to engage with these companies to turn conversation into action and ensure companies make good on their promises on behalf of our clients. Accountability is a unique and critical lever we as active owners can utilise to ensure that this happens.”
“In the UK, EU, US, and Australia, we pushed through voting policies to drive better standards among the businesses we invest in,” says Mason.
The scale of abrdn means that stakes in large businesses carry big sway. If abrdn votes against the board of a major company, the press will take notice. By doing so, boards will get the message that action needs to be taken to address the concerns of their shareholders.
This year, abrdn announced new voting priorities for a range of issues. Underpinning them is abrdn’s commitment to using accountability to influence firms, says Andrew Mason, abrdn’s Head of Active Ownership. “As an asset manager, we have a clear mandate to engage with these companies to turn conversation into action and ensure companies make good on their promises on behalf of our clients. Accountability is a unique and critical lever we as active owners can utilise to ensure that this happens.”
“In the UK, EU, US, and Australia, we pushed through voting policies to drive better standards among the businesses we invest in,” says Mason.
The result: active engagement delivers change
As an investor in several mining companies, abrdn recognised the scale of the problem and how it could leverage its influence to deliver change. Even before the scandal in Australia broke, abrdn was engaged with mining companies it holds shares in to help them instigate a series of changes and policies that will eliminate workplace behavioural issues.
In February, abrdn produced a statement that highlighted the issues facing the industry: “Over the last two years, we’ve undertaken focused engagement with our larger mining holdings to understand what actions they are taking to improve performance in these areas and how we can help drive that improvement.”
Mason called on firms to “use all the tools they have available to them – governance, performance incentives such as remuneration, oversight, monitoring and reporting – to improve workplace behaviour, diversity, equity and inclusion, and apply the same rigour of existing health and safety regimes to psychological safety.”
The engagement by abrdn was welcomed within the industry and saw endorsements by ten CEOs from the world’s biggest mining companies. Graham Kerr, CEO of Australian firm South32 commended abrdn’s efforts “to encourage engagement between investors and mining companies on the common goal of improving workplace culture and psychological safety.”
In February, abrdn produced a statement that highlighted the issues facing the industry: “Over the last two years, we’ve undertaken focused engagement with our larger mining holdings to understand what actions they are taking to improve performance in these areas and how we can help drive that improvement.”
Mason called on firms to “use all the tools they have available to them – governance, performance incentives such as remuneration, oversight, monitoring and reporting – to improve workplace behaviour, diversity, equity and inclusion, and apply the same rigour of existing health and safety regimes to psychological safety.”
The engagement by abrdn was welcomed within the industry and saw endorsements by ten CEOs from the world’s biggest mining companies. Graham Kerr, CEO of Australian firm South32 commended abrdn’s efforts “to encourage engagement between investors and mining companies on the common goal of improving workplace culture and psychological safety.”
Others, such as BHP CEO Mike Henry, spoke of the progress they are making on creating a “safe, inclusive and respectful culture”, adding: “Everyone who comes to our sites has a right to thrive.”
Jakob Stausholm, Rio Tinto’s CEO, pointed to its own review of workplace culture in 2021 that it published last year and included “deeply disturbing findings”. He added that action was underway to create an “open and transparent environment which will make positive and lasting change and strengthen our workplace culture for the long term.”
Another supporter of abrdn’s efforts was the International Council on Mining and Metals (ICMM), which represents leading global mining companies in efforts to develop a sustainable industry. Rohitesh Dhawan, President & CEO of ICMM, welcomed the supporter of investors to “build psychologically safe and truly diverse, equitable and inclusive workplaces in the mining industry.”
Jakob Stausholm, Rio Tinto’s CEO, pointed to its own review of workplace culture in 2021 that it published last year and included “deeply disturbing findings”. He added that action was underway to create an “open and transparent environment which will make positive and lasting change and strengthen our workplace culture for the long term.”
Another supporter of abrdn’s efforts was the International Council on Mining and Metals (ICMM), which represents leading global mining companies in efforts to develop a sustainable industry. Rohitesh Dhawan, President & CEO of ICMM, welcomed the supporter of investors to “build psychologically safe and truly diverse, equitable and inclusive workplaces in the mining industry.”
Looking ahead
Whereas other investors might have looked to divest from the mining sector to protect their own reputations, abrdn’s approach was to work with the industry on reform.
Engaging with the industry provides benefits for abrdn, its investee companies and the wider market. A sense of collaboration with investee firms means they know abrdn wants to help them improve and fulfil their potential. And abrdn’s leading role in highlighting these issues within the mining industry is unique among asset managers.
Yet the work to improve standards in mining hasn’t finished. Over the next five years, abrdn will be ratcheting up its expectations of boards within the sector. They expect 40% of boards to be female within UK-listed investee companies by 2025 and want to see further representation of ethnic minorities too.
Engaging with the industry provides benefits for abrdn, its investee companies and the wider market. A sense of collaboration with investee firms means they know abrdn wants to help them improve and fulfil their potential. And abrdn’s leading role in highlighting these issues within the mining industry is unique among asset managers.
Yet the work to improve standards in mining hasn’t finished. Over the next five years, abrdn will be ratcheting up its expectations of boards within the sector. They expect 40% of boards to be female within UK-listed investee companies by 2025 and want to see further representation of ethnic minorities too.
And while most effort so far has been on influencing the boardroom, abrdn sees an opportunity to shift focus to the wider workforce and to push for more diversity across all leadership teams. At the same time, attention in the coming years will go beyond workplace behaviour and gender parity. Mental health is likely to become a central issue. Workers often spend three months at a time on sites, with detrimental effects on their mental health. Similarly, there will be a push to include stress and anxiety in health and safety policies at mining firms.
The business case for diversity
While some take the view that businesses shouldn’t be distracting themselves from the goal of profit with diversity efforts, this is not a view shared by abrdn. “We don’t look at D&I as an exercise in PR and to gain favour in the press,” says Mason. “It’s a financially driven strategy.”
As investors, abrdn has a duty to its clients to ensure that investee companies operate in a responsible manner. Having a diversity strategy indicates a commitment by management beyond mere short-term performance, towards a sustainable, longer-term goal. And because of that, those companies are more likely to align with abrdn’s investment approach.
As investors, abrdn has a duty to its clients to ensure that investee companies operate in a responsible manner. Having a diversity strategy indicates a commitment by management beyond mere short-term performance, towards a sustainable, longer-term goal. And because of that, those companies are more likely to align with abrdn’s investment approach.
At the same time, if the management of a company recognises the diversity of their customers and is aligned with their values, it’s more likely to enjoy a loyal and strong relationship with them. As Andrew Mason, abrdn’s Head of Active Ownership, reflects: “If your board and management is reflective of your customers and employees, then you’ll make more money.”