Video: Douglas Silver on the clash between NPV and ESG

There’s an inherent conflict between the way mining investments are valued and environmental social and governance (ESG) principles, says mining veteran Douglas Silver. 

Net present value (NPV), the dominant metric used to evaluate mining investments, compares future cash flows to their equivalent in today’s dollars. NPV encourages companies to build the biggest possible mine and exploit it quickly. Environmental, social and governance (ESG) principles don’t factor in. 

But Silver, an inductee into both the Canadian Mining Hall of Fame and the U.S. National Hall of Fame, says there’s a metric that could incorporate both. 

Using the multiple on investment cash flow (MOIC) metric would support building smaller mines with a smaller environmental footprint but a longer life providing lasting benefits to communities, he says. 

“It would better align us with concepts behind ESG,” he told The Northern Miner’s Western Editor Henry Lazenby at this year’s Prospectors and Developers Association of Canada convention. 

Watch the full conversation below.