· 5 min read
Gold has surged past $4,000 per ounce in 2025, marking the strongest rally since the pandemic. At first glance, this meteoric rise seems like a classic ESG dilemma: when prices climb, conventional wisdom suggests that miners will extract more aggressively, prioritizing profit over environmental stewardship. The intuitive narrative is simple — higher prices drive higher output, which drives higher emissions. For an asset often criticized for its environmental footprint, this would appear to be a step backward.
Yet, recent research suggests that the relationship between gold prices and environmental impact is more nuanced than it appears. In 2020, a landmark paper by the University of Queensland and the University of British Columbia quantified the environmental and social costs of the energy transition’s metal boom. Their findings indicated that surging prices often push miners into riskier frontiers — regions with weaker governance, limited oversight, and heightened ecological stress. Applied to gold, the logic seems straightforward: a higher price-per-ounce should incentivize mining expansion, potentially at the expense of ESG principles.
However, more recent evidence complicates this assumption. Seraj and Olaide (2024), examining gold production in the BRICS economies, show that emissions are not consistently correlated with price volatility. Instead, the researchers argue that the environmental footprint of gold is more strongly linked to economic reinvestment decisions. In other words, emissions tend to rise when profits are channeled into energy-intensive industrial expansion rather than cleaner production techniques. Price alone does not dictate environmental impact; what governments and companies do with the windfall matters far more.
This pattern is reinforced on the corporate side. Calzada Olvera and Lizuka (2023) studied commodity producers during periods of high prices and observed a temporary reallocation of capital: firms prioritized exploration and production R&D over ESG initiatives. When prices normalize, investment often shifts back toward efficiency improvements, cost reduction, and pollution control. Interestingly, these two objectives — profitability and environmental stewardship — are not mutually exclusive. Optimizing energy use, water consumption, and labor efficiency often reduces both costs and emissions, creating a natural feedback loop where long-term ESG compliance aligns with financial discipline.
In practical terms, this dynamic helps explain why gold’s 2025 bull run may not have the environmental impact one might fear. The largest producers — China, Russia, and Australia — are operating near mature capacity. Expansion projects face multiple constraints: permitting delays, rising input costs, and heightened scrutiny from investors who are increasingly attentive to ESG risks. As a result, the current rally has boosted margins more than output, allowing companies to earn more without producing more. The carbon intensity per ounce remains largely stable, and investments in cleaner refining technologies are becoming feasible thanks to higher profits. Hydrogen-based smelting trials in Canada and the Nordic countries illustrate how these windfalls are being directed toward sustainable innovation.
From an investor’s perspective, this presents an important paradox: gold’s high price may actually reinforce ESG discipline rather than undermine it. Supply constraints limit expansion, regulatory oversight has tightened, and demand is shifting increasingly toward institutional hedging rather than mass consumption. High prices create financial room for sustainability-focused investments that might have been deferred during leaner years. Furthermore, the World Gold Council’s Responsible Gold Mining Principles, while voluntary, are emerging as de facto benchmarks for institutional investors, providing additional oversight that mitigates environmental harm.
This paradox also challenges conventional ESG narratives. It is tempting to view commodities as inherently environmentally damaging during bull markets, yet gold demonstrates that context matters. Time in the market — the structural maturity of existing mines and regulatory environments — can act as a natural brake on emissions, counterbalancing the pressure of surging prices. Conversely, “timing the market” by rushing production to exploit short-term price spikes could be far more damaging if it led to uncontrolled expansion into ecologically sensitive regions.
Of course, this is not a claim that gold mining is sustainable in absolute terms. Mining remains resource-intensive, and environmental challenges are persistent. But the data suggest that high prices alone are insufficient to worsen ESG outcomes — capital allocation, regulatory oversight, and technological innovation are the true levers of impact. For institutional investors and portfolio managers, this distinction is critical: gold can serve as both a hedge and a relatively disciplined commodity from an ESG standpoint, provided that production remains governed by robust capacity constraints and governance frameworks.
Looking forward, the interplay between price, production, and ESG performance is likely to remain a key feature of the market. As gold prices continue to climb, the sustainability outcomes will increasingly hinge on whether profits are reinvested responsibly. The 2025 bull run may be remembered not just for its record-breaking margins but for the paradoxical discipline it imposed on an industry long criticized for its environmental footprint. In a market where oversight is rising, technology is improving, and demand is evolving, gold may offer a rare example where high financial returns and environmental responsibility are not mutually exclusive.
Gold’s 2025 rally illustrates a counterintuitive reality: price surges do not automatically translate into higher emissions. Instead, mature production capacity, regulatory scrutiny, and strategic capital allocation are the true determinants of environmental impact. For ESG-minded investors, this represents both a challenge and an opportunity: gold remains an asset that can grow in value without necessarily growing its environmental footprint, provided that governance and innovation keep pace with market exuberance.
illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.
Track the real‑world impact behind the sustainability headlines. illuminem’s Data Hub™ offers transparent performance data and climate targets of companies driving the transition.
