About RCF
Established in 1998, Resource Capital Funds (“RCF” or the “Company”) pioneered the concept of a mining-focused private equity fund. Since its inception, RCF has provided financial support to over 200 mining and mining services companies. Today, RCF manages investment vehicles (“Fund” or “Funds”) which have invested in public and private mining and mining services companies across more than 32 mineral commodities in more than 51 countries. Our investment management teams, which include professionals with extensive mining and ESG experience as well as deep investing expertise, are organized around the following four investment strategies aimed at providing funding throughout the development risk spectrum and capital structure:
RCF Private Equity invests in growth-oriented mining companies where our capital, expertise and capabilities can help create value.
RCF Opportunities invests in mining assets at all stages of development, including exploration through pre-feasibility stages of projects and selectively at more advanced stages of project development and operations.
RCF Jolimont Innovation invests in high-growth mining equipment, technology and services (“METS”) companies.
RCF Credit expects to build a diversified portfolio of credit investments across three broad strategies: development capital, growth and operating capital, and special situations.
Vision, Mission and Values
Build strong, successful, innovative and sustainable businesses that strive to produce superior returns to all stakeholders.
Act as a transparent and trusted fiduciary, delivering value to Limited Partners.
Be a long-term partner to the mining companies and projects in which we invest.
Provide a challenging, engaging, inclusive and rewarding environment for employees to work.
Passion
Discipline
Integrity
Respect
Teamwork
Co-Founder & Managing Partner Resource Capital Funds
A Message from James McClements
At Resource Capital Funds, we understand first-hand the vital role that responsible mining plays in providing the raw materials that underpin global infrastructure and the transition to a sustainable world. Minerals are critical inputs for the manufacture of many of the technologies that are necessary to support the “just transition” and global decarbonization efforts, and according to estimates by the International Energy Agency (“IEA”), the energy sector alone will require as much as six times the current output in minerals by 2040 to meet the demands of this transition. To ensure that the supply of the critical materials can meet this demand, strong growth in investment in diversified sources of supply is required.
RCF has seen a renewed interest by investors in mining as a desirable asset class, as they recognize there are sizeable opportunities for those who can produce critical minerals in a sustainable manner. These investors are increasingly concerned about how companies are managing ESG issues; today, it is no longer enough to simply avoid adverse outcomes from mining operations and to be aware of risks. Mining companies must demonstrate the proactive and positive contributions they are making to protect the environment, contribute to the socio-economic development of local communities and create value for all stakeholders.
ESG Stewardship
ESG stewardship is a foundational component of RCF's investment strategy, and responsible investing is a key lever of RCF's approach to value creation. For RCF, it's not simply about the commodity we invest in, it is about how that commodity is mined. As such, we have built our Company's reputation on the way in which we integrate ESG criteria into our rigorous investment analysis and ongoing management, which enables our investment teams to systematically identify and address material ESG risks and opportunities.
RCF has been investing exclusively in the mining and minerals industry for almost 25 years, through all phases of the commodity lifecycle. Our team has deep technical knowledge, commercial experience and people networks. This means we are well positioned to participate as a strategic capital partner to create sustainable value by working closely with the boards and management of our portfolio companies to de-risk and develop and operate mining assets. An important part of this is advocating for and supporting the implementation of ESG “good practices” across a range of areas, including, but not limited to, health and safety, environmental performance, local and Indigenous participation, and governance. RCF's active participation in portfolio companies' ESG committees is an important tool for governance and collaboration, allowing us to share learnings and drive sustained value creation and protection.
Transparency
RCF recently conducted our first materiality assessment to identify the issues that are truly important to our various stakeholders and that have the greatest impact on our business. We heard from our stakeholders about the importance of transparency in our approach to disclosure and reporting. To this end, this report is our first step towards alignment with globally recognized ESG reporting frameworks, the Sustainability Accounting Standards Board (“SASB”) and the Task Force on Climate-related Financial Disclosures (“TCFD”). We intend to continue to improve our disclosure, including working closely with our portfolio companies to help them improve their ESG data management and reporting practices.
Looking Ahead
Stakeholders' expectations around ESG performance continue to evolve, and companies will need to invest more time and resources in evaluating and influencing ESG risks and opportunities. Early identification of important ESG factors presents companies with the ability to mitigate potential risks through project design, remedial work or engagement with key stakeholders. RCF is ideally placed to leverage our influential relationships with our portfolio companies to ensure this is done effectively.
Looking forward, RCF will continue to develop and execute on our Responsible Investment Strategy. In this report, we are pleased to share our ESG roadmap which focuses on several key areas including climate, diversity, equity and inclusion, and ESG data management and reporting. This will be complemented by the development of targets so that we can measure our progress against our sustainability goals. We remain steadfast in our commitment to ground ESG in our core strategy with a view to long-term value creation for all our stakeholders.
I invite you to learn more about RCF's ESG strategy, commitments and accomplishments in the following pages of this report.
James McClements
Co-Founder & Managing Partner
In Conversation with RCF's Chief Sustainability Officer, Kevin PCJ D'Souza
Q: You recently joined RCF's senior leadership team. What drew you to the Company?
A: I was drawn to RCF as I truly believe the Company is motivated by creating long-term value based on a holistic approach to ESG. For me, it was clear that at RCF, ESG is not merely a bolt-on. Rather, it's built into RCF's business strategy. The Company has a strong reputation and a purposeful organizational culture that starts at the senior leadership level and that ensures all aspects of ESG are firmly embedded in every investment decision they make. Through their Responsible Investment Strategy, they seek to identify and help mitigate ESG impacts and risks and capitalize on opportunities throughout the entire mining lifecycle, from exploration through to post-closure, by collaboratively working with their portfolio companies to strengthen ESG practices and performance. They identify and assess both risks and opportunities to generate not just financial but also environmental and societal value. Through this approach, RCF aims to demonstrate that mining and ESG can be successfully integrated and that mining can be a driver for positive change. These and more were all important considerations for me prior to joining the Company, and I now look forward to working with my RCF colleagues on continuously improving our ESG performance.
Q: You have been known to speak about “authentic ESG.” What does that look like in practice in the mining industry?
A: I believe ESG as a construct is fundamentally about understanding how a business interacts with the world. This starts with a strong governance structure that includes clear lines of accountability and ownership.
A robust ESG strategy and pragmatic framework involves putting in place policies and minimum operating standards based on accepted industry “good practices” that reflect each company's unique situation and that go beyond mere legal and regulatory compliance. Internal processes and procedures that prioritize, integrate and address the needs and goals of all stakeholders, from local communities to shareholders, are also critical components of authentic ESG implementation. And of course, meaningful ESG metrics and analytics to quantify and monitor a company's impact are essential for continuous improvement. For me, authentic ESG is also about taking a hands-on approach with boots on the ground. ESG cannot be directed from a satellite unit responsible for creating reports, delegated to “armchair experts” or simply analyzed on paper. This is where I believe RCF really excels in terms of how our investment teams conduct due diligence and post-investment collaboration with our portfolio companies to influence the implementation of responsible mining practices and in turn determine how authentic a company is when it comes to their ESG practices and commitments.
Q: What key trends do you see shaping the mining industry in the near to medium term and what role does ESG play in these trends?
A: RCF believes there are five global megatrends that are influencing the mining industry in a significant way: decarbonization, consumption, underinvestment, geo-politics and sustainability. The green energy transition is creating a shift that is “critical mineral” driven which is creating a surge in demand for critical minerals to deliver the new technology, infrastructure and capacity required to meet global decarbonization goals.
At the same time, population growth and continued efforts to eliminate poverty across the globe are creating a rising demand for material goods that will add significantly to the need for mined products. However, the past decade has been marked by a sustained period of underinvestment in new metal and mineral supply. When you add to that the intensifying geo-political tensions and the rollback of globalization to shore up national infrastructure and reduce supply chain dependence on single jurisdictions, you create a significant imbalance between supply and demand of minerals.
These interrelated trends are putting a renewed spotlight on mining and increased scrutiny on how critical minerals are sourced, which will only intensify in the coming years. Companies that are managing ESG strategically to bring greater local economic benefits and are more sensitive to local concerns and needs will be best positioned to take advantage of these trends while ensuring they can create and protect long-term value.
Q: What are your priorities for ESG at RCF going forward?
A: At RCF we are aware that we don't have all the answers. But for us, ESG is an evolution - it is a process not an outcome. As such, one of our immediate priorities is to build on RCF's ESG Strategic Roadmap (the “Roadmap”) with an executable framework of actions and deliverables. The Roadmap focuses on several key areas that resulted from our internal strategic assessment, supplemented by the materiality assessment we conducted in early 2022.
We have started by focusing on improving our due diligence and post-investment stewardship processes to continue to ensure we uphold the Principles for Responsible Investment (“PRI”) and align with the United Nations Sustainable Development Goals (“SDGs”). We are developing a multi-year Diversity, Equity & Inclusion (“DE&I”) strategy that will include a governance structure, training programs and an overhaul of our talent management policies and procedures. We are also in the process of assessing our climate-related risks and opportunities, and as part of that, we are strengthening our understanding of the emissions intensity of existing and potential portfolio companies. The other priority focus area for us is to enhance the way we collect and monitor ESG data from our portfolio companies, and in turn to improve our own reporting so that we can continue to demonstrate meaningful impact. For instance, this report includes RCF's first SASB disclosure, against the “Asset Management & Custody Activities” Standard. Going forward, we are committed to evolving our approach to ESG disclosure to include reporting against select indicators for our portfolio companies.
ESG is constantly changing, but I am confident that at RCF we have the right company culture, visionary leadership and appropriate strategy to meet the future challenges of an ever-evolving ESG landscape and thereby continue to future-proof our business.
Kevin PCJ D'Souza
Chief Sustainability Officer & Member of RCF's ESG Committee
Corporate and ESG Highlights
Our Approach to ESG
At RCF we believe in the importance of investing responsibly and that there is a strong symbiotic relationship between effective ESG performance and strong financial performance. Hence, we see ESG as a key lever of value creation. Since formalizing our approach to ESG in 2013, we have focused on deepening ESG integration across the investment lifecycle, from initial due diligence through to exit. Our relationships with our portfolio companies, which often begin at the early stages of project development, as well as RCF's long-term investment horizon, support this approach.
Our responsible investment actions are guided by RCF's senior leadership, who provide ultimate oversight of our ESG strategy. We have an established ESG Committee, which is made up of senior Partners from across RCF, plus our Chief Sustainability Officer. The Committee is responsible for governing the advancement, development and implementation of our Responsible Investment Strategy and monitoring the effectiveness of our performance. It meets at least twice a year to review RCF's policies and strategy, evaluate ESG objectives and assess our portfolio companies' ESG performance.
RCF's Responsible Investment Policy articulates our portfolio stewardship approach, which includes a robust pre-investment due diligence process, a post-investment ESG management plan and an exit strategy. Our Chief Sustainability Officer works closely with RCF's investment teams to ensure as much as possible that relevant ESG matters are integrated into their investment analysis and management activities. First and foremost, RCF's investment practices comply with regulatory requirements, and the companies we invest in are expected to adhere to all applicable laws and regulations, as a minimum. Our approach also reflects RCF's longstanding commitment to the Principles for Responsible Investment.
The comprehensive integration of ESG criteria into our investment analysis enables us to evaluate and assess ESG-related risks and opportunities which may affect an investment's performance. Our investment analysis is based on specialized research and key information disclosed by portfolio companies and findings from site visits, which are cross-referenced against applicable legal requirements, relevant industry “good practices” and key voluntary standards.
Working with Our Portfolio Companies to Integrate ESG
Although the companies in which we invest are independently operated and managed, RCF actively collaborates and engages the companies to encourage them to implement responsible mining and ESG business “good practices” along with relevant industry standards into their business systems. We seek to actively monitor key ESG risks and opportunities at the Fund level and encourage our portfolio companies to do the same.
RCF chairs and/or participates in several ESG board committees and working groups within our portfolio companies, actively participating in regular meetings to review their ESG management approach and actual performance. The creation of these committees continues to seek to raise awareness and build institutional ESG capacity within the companies and provides a forum for in-depth ESG discussions. In addition, where necessary, we have also helped our portfolio companies recruit board and management team members who have strong ESG expertise through our network of highly experienced ESG professionals. These ESG specialists work to ensure ESG is fully understood, appropriately discussed and proactively managed at the board level to protect and build company value.
Within RCF there is a genuine desire to do the right thing by helping portfolio companies move up the curve in terms of their ESG practices and to partner with our companies to produce positive outcomes for all stakeholders."Jasper Bertisen
Partner, Investment Team Leader & Chair of RCF's ESG Committee
2023 ESG Roadmap
Continuing to enhance our approach with a focus on long-term value.
ESG Strategic Framework
- Review of ESG Policy & Strategy
- Review ESG Committee Charter
- Develop and implement multi-year ESG strategy
Total Portfolio Stewardship
- Conduct ESG "heatmap" diagnostic for portfolio companies
- Continual improvement of ESG due diligence
- Deliver internal ESG training
- Strengthen Board ESG Committee impact
Climate Change Strategy
- Review Climate Change Policy
- Develop multi-year climate strategy
- Assess climate-related risks and opportunities for current portfolio companies
- Improve TCFD reporting
Develop ESG Investment Theses
- Continue to evaluate LP ESG-related perspectives and expectations
- Explore ESG thematic impacts aligned with the SDG Impact Standard
- Ensure ESG is integrated in exit strategies
Diversity, Equity & Inclusion Strategy
- Develop multi-year DE&I strategy
- Establish employee resource groups
- Conduct current state inclusivity assessment
- Review policies and procedures
ESG Performance Reporting
- Survey portfolio companies to get a baseline of available ESG data and quality
- Set appropriate ESG targets and key performance indicators
ESG Strategic Framework
- Review of ESG Policy & Strategy
- Review ESG Committee Charter
- Develop and implement multi-year ESG strategy
Climate Change Strategy
- Review Climate Change Policy
- Develop multi-year climate strategy
- Assess climate-related risks and opportunities for current portfolio companies
- Improve TCFD reporting
Diversity, Equity & Inclusion Strategy
- Develop multi-year DE&I strategy
- Establish employee resource groups
- Conduct current state inclusivity assessment
- Review policies and procedures
Total Portfolio Stewardship
- Conduct ESG "heatmap" diagnostic for portfolio companies
- Continual improvement of ESG due diligence
- Deliver internal ESG training
- Strengthen Board ESG Committee impact
Develop ESG Investment Theses
- Continue to evaluate LP ESG-related perspectives and expectations
- Explore ESG thematic impacts aligned with the SDG Impact Standard
- Ensure ESG is integrated in exit strategies
ESG Performance Reporting
- Survey portfolio companies to get a baseline of available ESG data and quality
- Set appropriate ESG targets and key performance indicators
Frameworks and Standards
RCF actively engages and participates in relevant industry initiatives and ESG-related collaborations, and we seek to employ tools provided by internationally recognized mining specific “good practice” frameworks. In particular, our strategy and related processes draw from the following sources and frameworks:
The United Nations Principles for Responsible Investment ("PRI"): A UN-supported network of investors that works to understand the investment implications of ESG factors.
The Sustainability Accounting Standards Board ("SASB"): An ESG guidance framework that sets standards for the disclosure of financially material sustainability information from companies to their investors. Please refer to page 26 of this report for RCF's first SASB disclosure, against the "Asset Management & Custody Activities" Standard.
The Task Force on Climate-related Financial Disclosures ("TCFD"): A set of voluntary financial disclosures developed to help companies provide consistent climate-related financial information to investors and other stakeholders.
UN Sustainable Development Goals ("SDGs")
The SDGs offer a universal approach and outcomes-based framework to realizing positive societal outcomes by providing 17 overarching goals and 169 targets that represent a call to action to end poverty, protect the planet, and ensure that by 2030 all people everywhere enjoy peace and prosperity.
RCF believes private equity has a critical role to play in delivering the SDGs, and we are aligned with the shared belief that the mining industry has an unprecedented opportunity to mobilize significant human, physical, technological and financial resources to advance the goals. At RCF, we aim to consider both the potential positive and negative impacts on the SDGs of our investments. In addition, grant proposals submitted for consideration by the RCF Foundation are assessed based on their alignment with the SDGs.
The Principles for Responsible Investment ("PRI")
The PRI is an international reporting framework that promotes the incorporation of ESG factors into investment practices across asset classes. It provides a common language and industry standard for reporting responsible investment practices. By implementing the Principles, signatories contribute to the development of a more sustainable global financial system.
RCF has been a signatory to the PRI since 2013, and we report to the PRI on our responsible investment activities annually. The reporting framework includes questions about investment practices that help drive the mission of the PRI. It considers how ESG factors are incorporated into investment processes and asset allocation decisions, how signatories assess and understand sustainability outcomes, and how these outcomes are measured.
The PRI assesses signatories' responses to identify how their responsible investment practices can be improved, with a primary focus on responsible investment implementation across organizations' overall investment processes. Reporting modules are scored with a numerical grading system ranging from 1 to 5 stars. The lowest grade is one star, allocated to those whose responsible investment behavior is at the lower end of what is expected from signatories. The highest score is five stars and awarded to those signatories who demonstrate leading practices within the responsible investment industry. In 2021, RCF received the following scores:
RCF's PRI Summary Scorecard - 20211
- DISCLAIMER: Source: UNPRI. Scores are disclosed for all modules where RCF received a score for the 2021 reporting cycle. Signatories report on their responsible investment activities by responding to asset-specific modules in the Reporting Framework. Each module houses a variety of indicators that address specific topics of responsible investment. Assessment scores are based on information provided directly to the PRI by RCF in the 2021 reporting cycle. The information has not been audited by the PRI or any other party acting on its behalf.
Broadly, we believe our scores reflect RCF's efforts to deliberately build our ESG program and adopt responsible investment principles across our business. We were pleased to receive above-average scores for the "Investment & Stewardship Policy" and "Private equity" modules, which cover the majority of assets under management.
The lower score for the "Listed equity - Active fundamental - voting" module primarily relates to the PRI's assessment of RCF's proxy voting policy and approach. RCF understands that proxy voting is part of our responsibility as stewards of our LPs' investments to provide clear and transparent feedback to investee companies, complementing ongoing engagement with portfolio companies on material business issues, including ESG and compensation matters. For this reason, we have recently completed a full review of our proxy voting policy intended to enhance our approach to voting and collaboration with other shareholders, particularly those proxy votes which relate to ESG matters.
Our full Assessment Report and Transparency Report for the 2021 reporting cycle is available online.
Stakeholder Engagement
We believe in the importance of respectful, meaningful and proactive stakeholder engagement to help us build and maintain strong relationships and better understand the interests and concerns of individuals and organizations that have a strong interest in and/or influence on RCF.
Our key stakeholders and our approach to engagement include:
LIMITED PARTNERS (I.E., THOSE WHO INVEST IN RCF'S FUNDS) AND PROSPECTIVE INVESTORS
The majority of our Limited Partners ("LPs") are located in the U.S. (based on tax status) and range from university endowments, foundations and philanthropic trusts to family trusts and pension funds. To fulfill our commitment to being a transparent and trusted fiduciary, we regularly engage with our LP's, providing quarterly reports and holding an annual general meeting to share our views on trends in the mining industry and the economic environment. The annual general meeting also includes a dedicated session to update LPs on material ESG matters which affected our portfolio companies and RCF's ESG strategy.
PORTFOLIO COMPANIES
RCF aims to be a long-term partner with the companies and projects in which we invest. This includes providing flexible financing alternatives, assisting in advancing projects and helping management teams raise capital. The level of engagement with our portfolio companies is based on the materiality of issues and the size of our holding, along with companies transitioning into the development/operational phases.
EMPLOYEES
As of December 31, 2021, RCF employed 95 people who work at our seven locations around the world. Our mission is to provide a challenging, engaging, inclusive and rewarding work environment and to ensure employees from diverse backgrounds, genders and ethnicities are offered equal opportunities at all levels. Flexible working approaches have been in place at RCF for many years, which enabled us to address the complexities associated with working from home during the COVID-19 pandemic with greater nimbleness and agility.
COMMUNITIES
Earning and maintaining local community and/or Indigenous groups' acceptance is perhaps one of the most challenging aspects of investing in mining, but also presents a great opportunity.
A key focus of our due diligence process is evaluating and monitoring each portfolio company's understanding of concerns and dynamics of the local communities and/or Indigenous groups where their operations are located and their ability to manage the social impacts, risks and opportunities unique to each jurisdiction. At RCF, we believe that responsible mining positively progresses socio-economic development and we seek to assess and monitor whether our portfolio companies are fully attuned to local concerns and needs, and how they deliver local equitable benefits and create shared value (including local employment and procurement).
In 2021, RCF employees in our Denver and Perth offices had the opportunity to participate in volunteering initiatives to show support for their local communities. These events also had the benefit of contributing to RCF's internal team-building efforts.
Governance
The ESG space is constantly evolving. One thing that has remained unchanged, however, is RCF's commitment to the principle of good governance. We recognize the connection between sound ESG governance and practice and the positive impact this has on facilitating everything from permit approval to securing a robust 'social license to operate,' and even access to capital. Therefore, every new RCF investment begins with due diligence on the quality of a company's governance structure, policies and practices."Chris Corbett
Chief Investment Officer
Our Approach
At RCF, we believe that good corporate governance is the foundation of successful performance. Primary governance topics for RCF's investment portfolio include anti-corruption and bribery, board composition and competency, business conduct and ethics, and permitting and regulatory compliance, all of which are addressed in our due diligence process. Prior to investing in a company, RCF teams seek to evaluate not just the composition of a company's Board of Directors but also the potential conflicts of interest, legal and regulatory risks, the levels of real and perceived transparency, and government capacity in the project's jurisdiction.
RCF seeks investments where the company has a clear and transparent anti-corruption and bribery policy that is enforced company-wide and communicated to key stakeholders. We expect companies to provide training on the different forms and manifestations of corruption and fully understand all relevant anti-corruption laws and regulations.
We will not invest in jurisdictions with excessive sovereign risk, countries that are the subject of international sanctions or those in which it is illegal for a U.S. entity to invest. As per our 2022-2023 ESG Strategic Roadmap, we will be reviewing our approach to assessing and managing governance risks and opportunities. This may include the development of region-specific guidelines and criteria for investment decisions as recommended by our stakeholders.
Although the majority of RCF's invested capital is deployed into privately owned companies, we have recently updated our proxy voting policy relating to our public company holdings to reflect the increased importance of proxy voting as an effective way for shareholders to contribute to clear, effective and accountable stewardship.
Examples of how we engage with our portfolio companies on their governance performance include the following:
- At a gold company, we gained broad shareholder support for meaningful changes to the Board to improve corporate governance and strategy.
- At a vanadium project, we helped to engage a consultant to assist the Board in developing its ESG vision and strategy and to prepare the company for operational-stage reporting against global standards as it enters construction.
Governance at RCF
We not only assess the governance practices of our portfolio companies but also aim to ensure that RCF's own internal governance structures, policies and practices are in line with stakeholder expectations and compliance. RCF is an SEC-registered investment advisor, and as fiduciaries of our investors' capital, we strive to conduct ourselves with integrity in everything we do.
How We Conduct Business
At RCF, governance is led by our 16-member Partner group, all members of which have an ownership stake in the firm. In addition, 95 current and former employees held varying levels of ownership stakes in the firm in 2021. The RCF Partner group includes people with a wide range of diverse perspectives, as well as individuals who have been with RCF for many years and those who are new to the firm.
Conflicts of Interest
RCF's policies and procedures aim to identify and properly disclose, mitigate and/or eliminate applicable conflicts of interest. RCF has a duty to act solely in the best interests of its investors and to make full and fair disclosure of all material facts, particularly where RCF's interests conflict with the interests of an investor.
In certain instances, disclosure to and consent of an investor may be facilitated through the Limited Partner Advisory Committee or another independent committee to the extent required by the applicable client's governing documents. The Limited Partner Advisory Committee, which comprises a group of LPs, makes decisions and addresses conflicts on behalf of all the LPs.
Ensuring Business Continuity
We have established a comprehensive firm-wide succession plan, alongside continuation plans for each of our Funds, to mitigate risk, ensure development plans for key roles and potential successors, and be well prepared should someone in a key leadership role depart. Each RCF Fund has an internal Investment Committee ("IC"), which includes Partners, members of the investment team (i.e., those proposing and managing investments) and most have independent external committee members. Risks and opportunities, including ESG, are presented to the IC and assessed in the context of the entirety of the investment. IC members monitor the portfolio as a whole and engage with members of the investment team as needed during due diligence and subsequent commitment and execution.
Governance is truly the glue that holds ESG together. Without good governance, a company cannot implement environmental and social performance in a meaningful manner."Russ Cranswick
Partner & Head of RCF Opportunities Fund
Environment
RCF recognizes that metals and mining operations depend on access to shared environmental resources, including water, land and energy. We are committed to the responsible stewardship of these resources throughout the mining lifecycle."Martin Valdes
Partner, Head of RCF Fund VII
Our Approach
At RCF we understand that mining is subject to potential risks and liabilities associated with the impacts to the environment. We recognize that environmental legislation, including climate change regulation, is evolving in a manner which will require stricter standards and enforcement.
We strive to conduct extensive due diligence on a wide range of environmental issues facing our portfolio companies to understand how these may affect performance. We currently place particular emphasis on effectiveness of biodiversity, waste and tailings management, and water stewardship, which were identified by our stakeholders in our materiality assessment as being of primary importance. Going forward, we will also be looking more closely at climate-related resiliency and adaptation as well as GHG emissions and a portfolio company's approach to climate change risk management.
We regularly review our portfolio companies' environmental performance. Depending on RCF's level of influence on a company's environmental practices and strategies, we may undertake several actions. These include collecting data on material environmental issues and reviewing environmental management practices, including monitoring leading and lagging indicators to ensure that appropriate investigations have been initiated and corrective and/or preventative action plans put into place. We may also engage external specialists to conduct specific environmental assessments and, where necessary, develop remediation plans.
Examples of how we use environmental due diligence to inform our capital allocation decisions and engage with our portfolio companies on their environmental performance include the following:
- At a bauxite project, we helped select highly specialized external consultants to identify critical habitat and develop a biodiversity action plan.
- Following extensive due diligence on a polymetallic project in Central Africa, RCF made the decision not to invest based on our belief that negative impacts on a critical biodiversity habitat could not be mitigated by the company.
Tailings Management
Tailings consist of processed rock or soil which are left over after the minerals of value have been separated from the rock or soil in which they occur. They can pose potential human health and safety risks and have adverse effects on the environment. Responsible tailings management is critical to minimizing and mitigating these risks.
In 2019, to address these risks, we engaged an internationally recognized consultancy to conduct a full assessment of our portfolio companies that have mining waste or water storage facilities. The initial review determined that there are no high-risk facilities within our portfolio, and the recommendations from the review were added to our due diligence process. We continue to work with external experts to help update our approach to better align with the Global Industry Standard on Tailings Management ("GISTM").
Global Industry Standard on Tailings Management ("GISTM")
In 2020, the GISTM was released with the aim of enhancing the safety of mine tailings facilities across the globe and preventing catastrophic failures. The GISTM is focused on safeguarding the rights of project-affected people by mandating transparency and accountability by mining companies regarding tailings management. To be compliant with the GISTM, mine operators must use specified measures to prevent the catastrophic failure of tailings facilities and to implement best practices in planning, design, construction, operation, maintenance, monitoring, closure and post-closure activities.
Our Approach to Climate Change
At RCF we recognize that climate change is one of the most pressing global challenges of our time and that actions aligned with the goals of the Paris Agreement are critical to achieving the SDGs, given the inextricable links between climate change, water, biodiversity and socio-economic development. We acknowledge that a changing climate and its impacts represent both physical and transitional risks and opportunities which could impact portfolio companies and potential returns to the Funds.
The Task Force on Climate-related Financial Disclosures ("TCFD")
Created in 2015 by the Financial Stability Board ("FSB"), the TCFD's aim is to promote more consistent disclosure of climate-related financial risks and opportunities. Their widely accepted framework is grouped into four pillars - governance, strategy, risk management, and metrics and targets. RCF acknowledges the importance of the TCFD's recommendations to providing investors with an increased understanding of the financial implications of climate change for their investments. This report is our introductory disclosure against the TCFD framework, and we are committed to continuous improvement of both performance and disclosure.
Governance:
The organization's governance around climate-related risks and opportunities.
Strategy:
The actual and potential impacts of climate-related risks and opportunities on the organization's businesses, strategy and financial planning.
Risk Management:
The processes used by the organization to identify, assess and manage climate-related risks.
Metrics and Targets:
The metrics and targets used to assess and manage relevant climate-related risks and opportunities.
Governance
As with all RCF's responsible investment actions, our senior leadership oversees the management of climate-related risks and opportunities. The direct management of RCF's Climate Change Policy, which was established in 2020, is under the mandate of the ESG Committee. The Climate Change Policy outlines RCF's approach to evaluating climate-related risks and opportunities, including considering climate risk as a factor in due diligence and ongoing portfolio company engagement.
In practice, responsibility for identifying, assessing and managing climate-related risks lies with RCF's investment teams, working in partnership with our Chief Sustainability Officer, and with guidance from our ESG Committee. Where applicable, investment committees for each Fund make decisions on where RCF deploys capital, considering material ESG issues, including the findings from climate-related analysis.
Strategy
Given the scale of our investment activities relative to RCF's own business, our investment portfolio is the primary focus of our climate strategy. We have identified several climate-related risks and opportunities which we expect to impact our portfolio companies over the short, medium and long term:
Physical risks
The physical impacts of climate change risks to mining operations, infrastructure, transport routes and communities globally, due to acute physical risks including the increased severity of extreme weather events and chronic physical risks related to longer-term shifts in climate patterns. For example, climate change is expected to cause more frequent droughts and floods, altering the supply of water to mining sites, disrupting operations and impacting local communities.
Transition risks and opportunities
The mining sector is facing pressure from governments, investors and society to reduce emissions. As governments align with the goals of the Paris Agreement, potential increases in regulated carbon prices may impact asset cash flows and valuations. We have also identified that relatively low emissions mining operations appear to be developing a competitive advantage which may provide better access to capital or enhance their ability to secure attractive offtake agreements.
For RCF, a key consideration is how demand for different commodities will be influenced by different climate transition pathways, as metals play a vital role in the transition to cleaner energy production. RCF's investment strategy actively seeks to identify opportunities to invest in future-facing commodities that will support global decarbonization.
Social Performance
We believe the ongoing acceptance of a company's business practices by the community and other key stakeholders is a critical factor in successfully developing a mining project. RCF's initial investment is often in the early stages of a mining development project, and companies must understand stakeholder concerns and perceptions and demonstrate a commitment to working collaboratively with the local communities and/or Indigenous groups to make a positive impact at the very beginning of a project."Jacqui Murray
Partner, Investment Team Leader & Member of RCF's ESG Committee
Our Approach
RCF regularly reviews its portfolio companies' social performance effectiveness and proactively engages management to ensure that strategies are in place to mitigate social impacts and risks, that the companies earn their “social license to operate” and strive to create social value, including post-investment. In particular, we try to assess risks and opportunities focused on occupational health and safety, community engagement, grievance management, strategic social investment, local content, community health, involuntary resettlement and relationships with Indigenous Peoples. Our level of engagement is based on the materiality of issues and the size of our holding, along with companies transitioning into development/operational phases.
We recognize that we don't have all the answers when it comes to social performance management and that we have many opportunities for continuous improvement, especially with respect to wider aspects of human rights. Our stakeholders have told us that we need to work on developing key metrics to be better able to evaluate our portfolio companies' social performance, particularly when it comes to community and relationships with Indigenous Peoples. In response to this feedback, we are reviewing the data we collect from portfolio companies on key social issues, including occupational health and safety leading and lagging indicators, community grievances, local employment performance, local skills training and social investments, to ensure we are collecting the right information to enable better decision-making and engagement.
Examples of how we engage with our portfolio companies on their social responsibility performance and help them provide sustainable long-term benefits to the communities where they operate include the following:
- At a silver-zinc-lead project, we were instrumental in replacing key Board directors and management to bring renewed focus on enhancing important relationships with First Nations communities. This led to meaningful impact-benefit agreements being signed with all three of the First Nations involved in the project.
- At a heap leach gold project, we helped establish an Independent Advisory Panel to engage stakeholders (including government, local leaders, community members, NGOs, academics, technical experts, and business and union representatives), record their concerns about the perceived environmental and social impacts of the project, and hold the project accountable for its commitments to adhere to international "good practices."
Diversity provides a competitive advantage in our business; therefore, it is vitally important for us to apply a diversity lens to our recruitment and talent management practices."Michael Rowe
Partner, HR Business Director
Diversity, Equity and Inclusion ("DE&I")
At RCF we believe that having a workforce comprised of individuals who bring diversity in gender, age, ethnicity, cultural background and sexual orientation leads to creativity, innovation and ultimately, better decision-making.
To ensure that everyone at RCF understands their rights and respects their colleagues, we require all employees to complete DE&I training. Within our portfolio companies, we evaluate Board of Director composition from a diversity perspective. Recognizing that there are significant challenges in the mining sector regarding all forms of diversity, we engage with our portfolio companies on a regular basis to discuss and influence board changes when and where we can.
RCF's Women's Leadership Group aims to create a forum for open and candid conversations about topics such as career growth, mentoring, and business and professional development for women in the mining and financial sectors. The program's aim is to provide encouragement and guidance and to develop and foster interaction among women at all levels of the organization.
Going forward, we will be assessing our DE&I policies and training with the aim of updating our programs to reflect best practice in unconscious bias awareness, psychological safety, and intercultural intelligence and communication. We are also working towards ensuring that our hiring, retention and promotion practices are free from discrimination of any kind, and we are developing metrics and key performance indicators to measure, track and report our progress which we look forward to sharing in future ESG reports.
Jacqui Murray, RCF Partner and Investment Team Leader, participates in Perth Mentor Walks through which she offers mentoring to aspiring women at every stage of their career.
Collaborating with Global DE&I Initiatives
RCF supports several DE&I initiatives both within and outside of our industry. RCF has for many years been a key and founding sponsor of the Australian Institute of Company Directors Director Pipeline Project, mentoring women on programs to achieve their first board roles. Two RCF employees sit on the Board of the Canadian chapter of Women in Mining ("WIM"), an international non-profit that pursues gender equality and promotes women's voices, access to opportunities and leadership in the mining sector. RCF employees are members of the WIM UK and WIM Colorado chapters. Several of our employees also participate in diversity organizations such as the Black North Initiative ("BNI"), which has a mission to end anti-Black systemic racism in Canada by utilizing a business-first mindset, and also a grassroots global organization, Diversity in Sustainability ("DiS"), which aims to support DE&I within the field of sustainability across all industries. The RCF Foundation has directly and through portfolio company management teams, supported grants to First Nations and Indigenous organizations in Australia and elsewhere.
Resource Capital Funds Foundation
The Resource Capital Funds Foundation (the "Foundation") was established in 2008 with a mission to support social change and promote sustainable development on a global scale. The Foundation supports philanthropic initiatives in communities where our portfolio companies operate and where our employees are located.
We evaluate funding applications based on each initiative's ability to help achieve the SDGs, and all applicants must clearly demonstrate how Foundation funding will contribute to one or more of the 17 goals. Grant review and project selection are conducted by our Foundation's Board of Directors. Funding applications may be initiated by any of our employees directly or on behalf of portfolio companies. Our Resource Capital Funds Foundation Annual Report provides a summary of the grants and details on the financial position of the Foundation. The Foundation also provides funding for RCF's employee matched giving program for contributions up to $250 annually to registered charitable institutions.
The broad mandate of the Foundation has resulted in the support of a wide variety of charitable causes reflecting both geographic and demographic diversity. We are proud to be making a positive impact on people across the globe, and we are grateful to be continuing the good work envisioned at the start of the Resource Capital Funds Foundation."Sherri A. Croasdale
Senior Advisory Partner & Chair of the RCF Foundation
Resource Capital Funds Foundation
2021 Grant Beneficiaries
| Relevant SDG | Beneficiaries | Geographic Location |
|---|---|---|
 No Poverty |
United Way - Northwest Territories | Canada |
 Good Health and Well-being |
Happy 2 Be Home Inc. | USA |
| Apraxia | USA | |
| Harry Perkins Institute | Australia | |
| Silver Chain Group Limited | Australia | |
 Quality Education |
York University | Canada |
| GeoFORCE Alaska | USA | |
| Catholic Organization for Development and Solidarity | Africa | |
| Alaska Resource Education | USA | |
| Colorado Mining Association Education Foundation | USA | |
| The Morgan Center | USA | |
| Save Our Youth Inc. | USA | |
| Boy Scouts of America | USA | |
| AARP Experience Corps Pinal-Casa | USA | |
 Affordable and Clean Energy |
Colorado Cleantech Industry Association Foundation | USA |
 Decent Work and Economic Growth |
Colorado School of Mines Foundation | USA |
 Reduced Inequalities |
The Navy Clearance Diver Trust | Australia |
 Sustainable Cities and Communities |
Twin Hills Trust | Africa |
 Life on Land |
The Wild Animal Sanctuary | USA |
Lighting the Way to a Better Future
In 2021, Orezone Gold Corporation ("Orezone"), a gold mining company that operates in Burkina Faso, applied to the RCF Foundation to obtain funding for the installation of solar powered lights in seven communities surrounding Orezone's Bomboré gold project. The lack of public lighting presents numerous issues for local residents, particularly for girls and women. At night and without light, women are not able to carry out income-generating activities such as weaving, trade and catering, which puts them at an economic disadvantage. Young girls typically do housework during the day and are not able to do their homework until their domestic chores are completed, thereby limiting the time available for studying during daylight. Lack of lighting also poses safety risks for all community members. In 2021, the RCF Foundation donated $15,700 for the installation of solar lamps. Based on the success of the project, Orezone has submitted a further application that would provide lighting to 11 additional communities in 2022.
Supporting Early Childhood Education for the Most Vulnerable
Every year, over 200 children under the age of five are diagnosed with cancer in the New York metropolitan area. Because these children suffer from a compromised immune system resulting from chemotherapy, they are not able to attend regular preschool because of the risk of exposure to viruses. For an immunocompromised child, even the common cold can lead to a life-threatening illness. In 2021, the RCF Foundation approved a $15,000 grant to the Morgan Center in Brightwaters, NY. This non-profit enables preschool age children battling cancer to learn and socialize with their peers in a safe environment. Morgan Center programs prepare children for kindergarten and provide a sense of normalcy and distraction from the stress of their illness and treatment.
Sustainability Accounting Standards Board (“SASB”) Index
RCF is committed to providing transparency in our sustainability reporting by providing meaningful information to our Limited Partners and other stakeholders and by continuing to enhance our disclosure, including with the following, which is our first effort to align with the Sustainability Accounting Standards Board ("SASB") framework. This report includes sustainability data for the year ending December 31, 2021.
SASB is an independent non-profit organization that sets standards to guide the disclosure of financially material sustainability information by companies to their investors. SASB created the Sustainable Industry Classification System® ("SICS"®) to group like companies based on their sustainability-related risks and opportunities. As of the date of this ESG Report, RCF is classified in the "Asset Management & Custody Activities" Primary SICS Industry. The SICS "Metals & Mining" classification is primarily geared towards mine operators and producers, but RCF recognizes that many of the topics and metrics included in this classification are relevant to its ESG performance. Going forward, we will be looking at developing metrics to also align with the SASB "Metals & Mining" Standard as part of our evolving approach to appropriate and balanced reporting.
| Topic | Metric | Response |
|---|---|---|
| Transparent Information & Fair Advice for Customers |
FN-AC-270a.1 (1) Number and (2) percentage of covered employees with a record of investment-related investigations, consumer-initiated complaints, private civil litigations, or other regulatory proceedings |
RCF does not have any employees who fall under the definition of "covered employees" under the FINRA rules. Therefore, this item is not applicable. |
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FN-AC-270a.2 Total amount of monetary losses as a result of legal proceedings associated with marketing and communication of financial product related information to new and returning customers |
RCF did not sustain any monetary losses in 2021 as a result of legal proceedings associated with our marketing and communications of financial product related information to new and returning customers. | |
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FN-AC-270a.3 Description of approach to informing customers about products and services |
Around 93% of RCF's Limited Partners ("LPs") are located in the U.S. (based on tax status) and range from university endowments, foundations and philanthropic trusts to family trusts and pension funds. RCF has an integrated approach to informing potential and existing LPs about RCF's capabilities to address their needs and meet their particular investment goals. This approach includes detailed policies and procedures to ensure that all marketing materials comply with relevant SEC regulation. Any performance data distributed by the Company and its Supervised Persons to prospective or existing Investors or Clients is subject to the provisions of Rule 206(4)-1 and Rule 206(4)-8 under the Advisers Act. To fulfill our commitment of being a transparent and trusted fiduciary, we regularly engage with our LPs, providing quarterly reports and holding an annual general meeting. Refer to page 11 of this ESG report for more detail on how RCF engages, communicates and collaborates with our Investors. Form ADV As a registered investment advisor, RCF is required to file a Uniform Application for Investment Adviser Registration on Form ADV ("Form ADV") with the SEC. Parts 1 and 2A of the Company's Form ADV are available for review by the SEC, applicable state regulatory authorities and the public via the SEC website. Per regulatory requirements, RCF's policy is to deliver the Form ADV Parts 2A and 2B to each prospective LP, prior to entering into a binding subscription agreement. |
| Topic | Metric | Response | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Employee Diversity & Inclusion |
FN-AC-330a.1 Percentage of gender and racial/ethnic group representation for (1) executive management, (2) non-executive management, (3) professionals, and (4) all other employees |
* N/A = not available or not disclosed |
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| Incorporation of Environmental, Social, and Governance Factors in Investment Management & Advisory |
FN-AC-410a.1 Amount of assets under management, by asset class, that employ (1) integration of environmental, social, and governance ("ESG") issues, (2) sustainability themed investing, and (3) screening |
ESG Integration
RCF believes in the importance of investing responsibly and that ESG management is as important as a project's technical characteristics or market conditions. As part of its investment analysis and risk management strategy, every investment team at RCF considers ESG factors in their investment processes. RCF believes that this contributes to the improvement of long-term returns and more sustainable businesses. 100% assets under management employ ESG integration. ScreeningDue diligence incorporates norms-based screening, drawing from relevant international standards to assess portfolio company performance and identify areas where performance does not satisfy RCF's minimum standards. RCF also employs negative screening in relation to investments in portfolio companies primarily engaged in the mining, exploitation or commercial production of thermal coal. 100% assets under management employ ESG screening. Sustainability-themed InvestingRCF does not have assets under management which have a specific mandate to be invested in sustainability-themed assets. |
| Topic | Metric | Response |
|---|---|---|
| Incorporation of Environmental, Social, and Governance Factors in Investment Management & Advisory |
FN-AC-410a.2 Description of approach to incorporation of environmental, social, and governance ("ESG") factors in investment processes and strategies |
Refer to the main body of this ESG report for comprehensive discussion on RCF's approach to the incorporation of ESG factors in our investment processes and strategies. |
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FN-AC-410a.3 Description of proxy voting and investee engagement policies and procedures |
Proxy Voting
The majority of investments made by the private investment funds to which RCF provides its advisory service ("Clients") are private companies. Where publicly listed equity positions are held, RCF has adopted policies and procedures which ensure that it complies with the requirements of Rule 206(4)-6 and Rule 204-2(c)(2) under the Advisers Act. RCF monitors the performance, activities and events related to each investment. When exercising its voting authority securities held by, it considers such information, evaluates other issues that could have an impact on the value of the security and votes with a view toward maximizing overall value. RCF votes all proxies in a prudent manner, considering the prevailing circumstances at such time and RCF's fiduciary duty to its Clients. In accordance with Rule 204-2 of the Advisers Act, RCF maintains appropriate books and records in connection with proxy voting. Engagement PolicyRCF's investee engagement procedures are governed by our Responsible Investment Policy and Strategy. The level of engagement with portfolio companies is based on the materiality of issues and the size of the ownership stake. Refer to page 11 of this ESG report for more detail on RCF's engagement strategy. |
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| Business Ethics |
FN-AC-510a.1 Total amount of monetary losses as a result of legal proceedings associated with fraud, insider trading, anti-trust, anti-competitive behavior, market manipulation, malpractice, or other related financial industry laws or regulations |
RCF did not sustain any monetary losses in 2021 as a result of legal proceedings associated with our marketing and communications of financial product related information to new and returning customers. RCF reports all such matters that are material to RCF in our filings with the SEC. |
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FN-AC-510a.2 Description of whistleblower policies and procedures |
RCF's Whistleblower Policy encourages employees to bring good faith claims of violations of applicable laws to the attention of the Chief Compliance Officer. The policy includes a non-retaliation measure and does not limit the rights of employees under applicable whistleblower laws and regulation to report violations of any such laws or regulations. | |
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FN-AC-000.A (1) Total registered and (2) total unregistered assets under management ("AUM") |
(1) RCF's total registered AUM was nil as of December 31, 2021. (2) RCF's total unregistered AUM was approximately $2.5 billion as of December 31, 2021. |
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FN-AC-000.B Total assets under custody and supervision |
As an alternative asset manager, total AUM is a more relevant activity metric for RCF. As of December 31, 2021, RCF had $2.5 billion AUM. |
Our Global Presence
RCF is headquartered in Denver and has regional offices in New York, London, Perth, Melbourne, Toronto and Santiago.
1400 Wewatta Street, Suite 850 Denver CO 80202, USA
Tel. +1 720 946 1444
24 Kings Park Road, Level 1 West Perth WA 6005, AU
Tel. +61 8 9476 1900
2 Jericho Plaza, Suite 103 Jericho, NY 11753, USA
Tel. +1 631 692 0043
Nueva Costanera 4040, #31 Vitacura, Santiago 7630000, CL
Tel. +56 2 2245 4361
25 York Street, Suite 610 Toronto ON M5J 2V5, CA
Tel. +1 647 726 0640
33 St James's Square, St James's London SW1Y 4JS, UK
Tel. +44 20 8132 7672
133 Flinders Lane, Level 1 Melbourne, VIC 3000, AU
Tel. +61 3 8638 8950
CONNECT WITH US
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linkedin.com/company/resource-capital-funds
enquiries@rcflp.com
Resource Capital Funds Headquarters
1400 Wewatta Street, Suite 850Denver, CO 80202
About Resource Capital Funds
For 25 years, Resource Capital Funds ("RCF") has been dedicated to delivering capital, growth and innovation to the mining sector to support demand for the foundational materials required to enhance the lives of everyone. RCF is a pioneer in mining-focused alternative investment where it partners with companies to build strong, successful, innovative and sustainable businesses that strive to produce superior returns for all stakeholders. RCF offers distinct investment strategies aimed at providing capital throughout the development and capital structure risk/return spectrum. Mining is an essential global industry for the world today and the world of the future. Everything society needs is either grown or mined. With paradigm shifts in demand driven by decarbonization, emerging middle-income growth and other global factors, RCF has the investment experience, technical and ESG knowledge, commercial expertise, and global networks necessary to invest throughout commodity cycles.