The role of environmental management in obtaining financing in the mining industry

"Environmental risk is becoming more important in debt and equity financing decisions in the mining industry worldwide. Demonstration of good environmental management practices and management systems has a direct impact on the ability of mine developers, operators and investors to raise financing. Based on experience in providing due diligence services, there are a number of factors that are important in assessing financial risks related to environmental issues in either new projects or existing facilities. A frame-work for understanding the importance and priorities of each element of environmental management is presented.IntroductionIn the context of lending money to a corporation, environmental issues represent another aspect of credit risk (Henry, 1989). These issues, because of their nature, represent the potential for large unforeseen expenditures if they are not known or acknowledged and are not being proactively managed. Lenders, other investors and their advisors, are becoming increasingly aware of the potential financial impact of environmental issues. Consequently, they are increasing their requirements for environmental audits to review the environmental issues, management practices and systems when they are considering financing mining and/or metallurgical processing operations worldwide.Many banks have signed the United Nations Environment Program (UNEP) Statement by Banks on Environment and Sustainable Development. Banks in this category include National Westminster Bank, the Union Bank of Switzerland, Deutsche Bank, and the Royal Bank of Canada."