Stakeholder prosperity bonds – the perspective of CFO’s

What do mining CFO's care about?

As Finance leaders, CFO's fundamentally focus on the financial health of their organization, ensuring that strategic and operational decisions are managed in ways that optimize value and that organizational controls are in place that mitigate a variety of risks.  As with all C-suite level leaders, CFO's bring their individual perspectives on how to execute against their accountabilities.  Some are strategic, focused on growth and M&A, others are more operational, cost and efficiency-centric. In all cases, a handful of basic accountabilities are in play for the CFO's of mid and larger sized mining companies.

1. Liquidity/cash management - ensuring that cash positions are solidly aligned with operational and strategic requirements of the business
2. Capital raises / investor relations - ensuring ongoing access to capital markets in the broader context of enabling positive relationships with active and potential investors
3. Cash flow and profitability – ensuring financial stewardship of the company
4. Risk management / organizational controls- ensuring that critical risks are understood and proactively mitigated
5. Compliance – ensuring the integration of governance and operational processes from legal perspective

Line of sight is central to these focus areas, leaders can only manage what they see. No leader likes surprises. 

In this context, do mining CFO's understand the value add from their #ESG teams?  Social risks are nebulous, and it is often difficult to understand whether these risks are being effectively managed and whether they are being converted into collaboration opportunities that deliver bottom line value.  

To that end, some questions that CFO’s and broader financial leaders like Controllers and Treasurers think about:

1. Does community engagement lower risks, and is the relationship between risks, costs and collaborative opportunities well understood?
2. Are surprises in play, where conflicts with communities and/or artisanal miners periodically impact site profitability?
3. Are processes in play for investors to understand the effectiveness of social engagement?

As CFO’s and broader financial leaders look at these kinds of questions, they look for KPI’s, estimates of risks and fact-based definitions of success.  The basic question from their perspective is whether value is being added, whether it is being added in cost efficient ways, and whether the strategic integration points of ESG teams are defined in ways that optimize this value.

The challenge is that CFO’s and broader Finance leaders don’t have consistent lines of sites or operational clarity.  KPI’s and broader perspectives on value-vs-cost-vs-risks are often subjective.  Even as they understand that social risks can affect operations, investors and overall enterprises, with quality of engagement potentially making the difference between conflict and collaboration, concrete information that is not highly subjective is often lacking.

In this context, would Stakeholder Prosperity Bonds make sense to CFO’s?

• Stakeholder Prosperity Bonds are ICMA-compliant sustainability bonds that are bespoke for mining, delivering value through regional programs that conceptually improve the lives of stakeholders along with economies in commercially bankable ways. The cost of capital of sustainability bonds are attractive relative to commercial bond markets.  At the same time, proceeds must be deployed in pre-defined areas that are agreed to and codified in KPI’s during the bond development process

Recognizing that these bonds come with an attractive cost of capital, would they contribute to overall capital stacks in ways that improve value from operations, lines of sight, risk profiles and long-term earnings in ways that are beneficial for CFO's? 

The scope of these bonds are geared toward delivering regional value, with large mining operations being derisked and with lines of sight facilitated through the integration of specific KPI’s.  Scope elements include:

• Artisanal mining professionalization – improving lives and financial outcomes

• Infrastructure development – power, water and road systems that are needed by large scale miners, artisanal miners as well as nearby communities

• Improvements for large mining projects – offtake from ASM that adds margin as well as strengthening of tailings dams and broader ecological aspects of mines

• Development of smaller processing facilities – potential extension of mining operations into value chains

Value results from a regional cross-stakeholder focus that also improves lives, ecology and economies, with line of site increased through the integration of KPI's focused on specific deliverables of regional programs. De-risked operations, increased transparency on social risks, the development of infrastructure, offtake and potential processing all support the financial health of mining companies.  Thinking about what CFO's care about, the fit is clear.

The mining industry has barely dipped a toe into the $1Trillion sustainability bond market.  Sustainability professionals do not generally think of mining as an applicable sector, and mining professionals often don’t see their operations as being sustainability-focused.  Stakeholder Prosperity Bonds open up this market as this dynamic is changed, as capital directly tied to the intersection of sustainability and business goals unlock value.

In summary, ICMA compliant Stakeholder Prosperity Bonds make sense for CFO’s when considering the interplay of cost of capital, value propositions that deliver value through regional approaches and improved lines of sight through the incorporation of specific KPI’s tied to key deliverable areas.