As investors become increasingly ESG savvy, QEM is showing how embracing those principles can add significant value, here and overseas.
There should be, by now, very little confusion over the importance of ESG for companies and investors alike.
It’s been the talk of the town for months, with some of the biggest names in the business of business getting on board to make that message loud and clear, including consultancy powerhouse PwC.
According to PwC’s “Asset management and wealth revolution 2022” report, ESG is set to become a key AWM market growth driver, replacing asset prices and flows as these traditional growth engines are threatened by gathering economic headwinds.
“ESG has become perhaps the most powerful driver of growth in asset and wealth management,” Olwyn Alexander, PwC Global Asset & Wealth Management Leader, PwC Ireland, said:
“The surge in demand for ESG investments highlighted in our survey exceeds almost all previous expectations. With the current economic headwinds, we have seen some correction in asset prices and there is a risk of significant contraction in capital markets that would result in a further decline.”
“This underlines the importance for asset managers and institutional investors alike to understand how to capture the shift to ESG as a counter-balance to potential portfolio underperformance as well as legacy product obsolescence.”
Case in Point: QEM vanadium
A prime example of the way adoption of rigorous ESG principles and reporting can, in turn, drive investment in a company is the story of QEM (ASX:QEM), a small Queensland outfit that is making some serious waves in the world of vanadium, while at the same time pushing hard for the best possible environmental outcomes.
Vanadium is classed as a critical mineral – with priority for development and investment – by the Australian Government due to its use in vanadium redox flow batteries (VRFBs) that are expected to play a significant role in the transition to renewable energy.
QEM’s main focus is its 249.6km2 Julia Creek vanadium project, which boasts a resource of 2,850Mt grading 0.31% vanadium pentoxide, with 360Mt in the higher confidence Indicated category as well as a best estimate (2C) Contingent Resource of 79 million barrels of oil contained within its shales.
It’s a resource that is looking highly likely to grow, too – in early August the company wrapped up a fresh round of exploratory drilling which tested 12 new locations.
Additionally, QEM is taking advantage of a circular economy opportunity to upcycle vanadium-rich industrial waste to produce V2O5, recently signing agreements with Sun Metals and Incitec Pivot.
Small team, big commitment
It’s a huge undertaking for QEM, because – like many companies operating in this space, QEM’s team isn’t particularly large.
But even though the small team has a lot of competing needs, QEM is determined to keep doing the hard yards to ensure that its ESG credentials remain a high priority.
“It’s been an important tool to engage our stakeholders to more formally share and communicate the very important social and environmental initiatives which are vital to building and strengthening the local community,” QEM said in a statement.
One of the major reasons why ESG is critical to QEM’s continuing success is that the company has been well ahead of the curve in identifying the growing role that it plays in attracting investors, domestically and internationally.
Over the past several months, the company has reportedly attracted new capital out of Singapore, following several roadshows and other opportunities for the company to increase investment from overseas.
Singapore is known as a market that is well-educated about ESG factors and with a well-progressed ESG strategy, companies like QEM have been able to significantly increase their impact within a particularly discerning pool of investors.
The reasons behind the importance of being able to demonstrate solid ESG credentials in Singapore lie in a concerted effort from the Singaporean government to develop policies and initiatives aimed at promoting sustainability and reducing carbon emissions.
For instance, the Sustainable Singapore Blueprint has been in place for around eight years, and is set to remain in place until at least 2030, providing a frontline commitment to local corporate action to ensure that companies are ‘doing the right thing’ in their operations.
The knock-on effect has been a broad adoption, and a deep understanding, of ESG by Singpore’s business community, putting it front of mind for both institutional and individual investors as a highly useful metric when deciding whether to back any company.
“We have seen the way in which QEM has been able to gain a competitive advantage in attracting overseas capital through the promotion of its commitment to ESG,” Brad Gurrie, CEO of global ESG Software-as-a-Service (SaaS) enterprise Socialsuite.
“It is because of QEM’s commitment to accurate, timely ESG reporting that it has been able to get its foot further in the door faster than its competitors,” Brad continues.
“Singapore’s commitment to sustainability has become a critical element in making those investment choices – so from a company point of view, it would be highly counterproductive to go seeking international investors without being able to provide hard data on why ESG is a valuable part of the company’s strategy, and the manner in which that is implemented.”
QEM is a great example of how the right data, in front of the right people, can make the process of attracting international investors a lot easier – and representatives from the Queensland vanadium miner have spent productive time there already, and have solid plans for the future, as well.
QEM recently revealed that it will be sending representatives to the Spark+ Singapore Mining Day in mid-September, where it will be one of 10 miners putting their best foot forward to bring foreign investment into local ASX-listed companies.
But it’s not just investment from overseas that a comprehensive approach to ESG can deliver, as Gurrie went on to explain.
Local microcap investors
“The Australian investor landscape has been undergoing some large, and rapid, changes in recent years,” Gurrie says, “and among the small and microcap investor ranks, ESG has emerged as a fundamental driver of interest and growth.”
“Investors in microcaps particularly have historically been the archetypal retiree investor types,” Gurrie continues. “But that’s where things have really started to change.”
“That traditional investor base is moving towards a younger, more socially conscious investor base – and that essentially means that any company that isn’t keeping ESG front of mind is potentially missing out on both overseas and local investors – two very large slices of the pie.”
“Most importantly, though, QEM’s successful leveraging of ESG principles is a demonstration that small caps can drive organisational value, without the big budgets and huge teams that a lot of the large caps rely on.”
This article was developed in collaboration with Socialsuite, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.