A deeper and more diverse pool of investors will bring much needed new capital into the minerals industry in Canada. In recent years, investment in the minerals industry has dropped, in part due to the attraction of high-risk sectors such as cannabis and blockchain and growth in passive investments.
To encourage capital back into the sector, the industry needs to hold tight to current investors and put in the work to attract a new generation that must include more women and younger people. A major component of this work will involve changing existing perceptions of mining to attract socially and environmentally aware investors.
“The key for the future is for British Columbia to strive to encourage responsible new investment in the province to maintain the pipeline of projects that eventually turn into mines,” concluded PwC’s annual B.C. mine report in May 2019.
OK, boomer
Traditional investors in the minerals industry fit a certain mold. Although data recording the ages and genders of individual investors is generally not made public, observations at investment conferences, such as the Vancouver Resource Investment Conference, which focuses on the junior mining market, show that speakers and attendees are overwhelmingly male and much closer to retirement than starting out in their careers. In general, they are white men of “baby boomer” age, born between 1946 and 1964. Metals, particularly “safe haven” metals like gold, are attractive to this demographic. Gwen Preston, an investment newsletter writer who publishes her research for subscribers as the Resource Maven, says: “The investors whom I speak with all the time at conferences, who like this sector, like the fact that the assets are real.” She also notes that older investors have lived through several stock market cycles and are attracted to the counter-cyclical diversifying force that is gold, but also to the excitement of the exploration game.
Women’s wealth
Generally, female investors are less motivated by this excitement, and are driven more by opportunities to generate wealth to provide for family, security and comfort, the WealthiHer Network Report 2019 found. WealthiHer surveyed over 2,500 men and women in the United Kingdom to tease out the differences between men and women investors and found women believe men take more risks with their investments. Risk tolerance is one of the many factors that influence investment decisions. Selfconfidence and knowledge of the industry play a role, along with the perceived impact of investment and conscious and unconscious bias in the finance industry. Despite these issues, there is a global push to attract more women investors into financial markets as the gap between the average wealth of women compared to men narrows.
The Credit Suisse Global Wealth Report October 2019 notes that two current trends are beginning to have an impact, namely that women are set to “benefit disproportionately from the rise in the flow of inherited wealth that is occurring in high income economies” and “women’s earnings are rising and more are becoming business leaders, so the self-made wealth of women is also rising.”
This may be good news for younger women but, according to World Economic Forum, the gender pension gap is growing. “Typically, the balances of women in retirement are 30 to 40 per cent less than men across the globe.” With less money in retirement, women are unlikely to grow their wealth through risky investments.
Initiatives to attract more women investors to exploration and mining will require helping them overcome the knowledge gap and exposing them to role models who have had success investing in the industry. As pioneering women in the industry have success, and as the industry becomes more diverse and inclusive overall, the wave of women investors will eventually break.
Millennials
Millennials, the generation of people born between 1981 and 1996, take a different approach to investing than their parents and grandparents. As the first “digital natives” born with technology at their fingertips, millennials are more likely to seek investment advice via social media and other online sources.
For many years, the exploration and mining industry has lamented losing investors to cannabis and cryptocurrency markets. But both the crypto and cannabis markets had a bumpy ride in 2019, and perhaps these investors are looking around for new opportunities in metals.
“In the last year, I have seen the investor we’ve all been looking for showing up at conferences – the younger investor who knows very little about metals and mining and has money from cannabis in their portfolio that they want to invest,” says Preston. “That person has showed up repeatedly in the last six to eight months at conferences I’ve attended.”
Responsible investing
A new era of responsible investing has begun. Research indicates that there is a strong correlation between women and younger investors and impact investing. The WealthiHer survey, for example, concluded that a key opportunity for the finance industry would be to place “more
attention on impact investing as desired by many women.” Women and young investors are using their values to direct their investment dollars into companies and industries that demonstrate environmental and social performance and good governance.
While it is clear to those within the industry that great strides have been taken to make the exploration and mining life cycle more socially and environmentally responsible, to the uninitiated, the terms “mining” and “responsible” make strange bedfellows. There is still an outdated vision of a dirty and irresponsible industry that is hard to shake.
“We’re going to have to speak up to get included in the portfolios,” says Preston. For exploration and mining companies to be included in responsible investment portfolios, the industry is going to have to become more transparent, actively work to break down these assumptions and have difficult conversations with people about how the industry works and why it is necessary.
“The industry still shies away from defending itself,” says Preston. “If you do want to encourage younger investors, younger generations are increasingly motivated by the environmental impact and, as an industry, we need to be willing to take that on.”
