The world’s fourth largest iron ore producer, Fortescue Metals Group, has been hit with an ESG score of 66 out of 100 by American credit rating agency S&P Global Ratings this week.

It reflects a score one below the 67-point average of more than 100 entities rated across 22 sectors globally.

By region, the agency said the highest average score is 72 for companies headquartered in Europe, the Middle East, and Africa – which mean those companies are “less prone to experience material ESG-related events and are better positioned to capitalise on ESG-related growth opportunities.”

FMG’s subpar result demonstrates that even though it has “robust ESG management practices and a credible ambition to address its high environmental and social exposure” according to S&P, its efforts toward downstream decarbonisation still remain “fairly nascent”.

But the firm said FMG has articulated net-zero targets for its direct and indirect carbon emissions and invests heavily in communities through hiring and sourcing contracts and engaging actively with local indigenous people in line with its vision to generate lasting socio-economic benefits where it operates.

“Its governance reflects its high transparency and reconciles the strong rule of law in Australia, which is its country of incorporation and operations, with the company’s large revenue exposure to China, which has less established governance standards,” S&P said.

 

String of green energy initiatives

Nevertheless, as Stockheader Josh Chiat previously reported, many investors and analysts have criticised the company’s green energy initiatives due to the vagueness in the sheer number of announcements which have been churned out since the start of last year.

FMG’s green energy leg, Fortescue Future Industries (FFI), now has around 700 staff and will take up around US$400-600 million of capex in FY22, with US$223m spent acquiring high performance battery business Williams Advanced Engineering – its latest green energy initiative.

WAE, an offshoot of the Williams F1 team founded by the revered, late Sir Frank Williams CBE, is a world-leading technology and engineering business renowned for its ground-breaking projects in high performance battery systems and electrification.

Last week, FMG announced WAE would bring its race-bred critical battery technology to FFI, which will in turn enable Fortescue to realise its industry leading 2030 net-zero target.

This will be achieved by working together to help bring green energy to life in Fortescue’s 3km long freight trains, 400 tonne haul trucks and industrial heavy mobile equipment.

One of the first major projects to be developed will be a world leading battery electric train concept, with more to be announced on this later in 2022.

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