Gold in economy decarbonization

The World Gold Council has been tracking global trends in the move towards decarbonization in the economy and the role that gold plays in this process. John Mulligan, Climate Change Lead & Market Relations at the World Gold Council, joined CNBC Africa to discuss the significant contribution that gold can make in decarbonizing the economy. Mulligan emphasized that while crypto may be a volatile investment option, gold remains a stable long-term asset with a positive role to play in the climate change narrative. The argument put forward by the World Gold Council is that gold, as an asset class, has a place in the new world of ESG principles and climate change awareness. Mulligan highlighted the two aspects of climate-related risks: transition risks, which focus on the role of a sector or industry in decarbonization, and physical risks, which deal with the actual impact of climate change. In the context of Africa, decarbonizing gold mining can lead to the decarbonization of local economies, especially in regions with limited resources or political will. The influence of the gold mining industry has already been seen in initiatives such as self-generation of energy through solar arrays and the expansion of hydro power in countries like Burkina Faso and the DRC. One of the key findings from a study conducted by the World Gold Council is the benefits of including gold allocations in a global multi-asset portfolio. Gold's unique carbon footprint, which lacks downstream emissions after leaving the mine or refinery, sets it apart from other assets and can contribute to reducing the overall carbon intensity of a portfolio. By modeling different portfolio scenarios with gold included, the results showed a positive impact on reducing scope three emissions and moving towards climate targets. Mulligan stressed the importance of this in a time where mainstream assets are struggling to decarbonize at a rate that aligns with climate goals. When asked about the future of gold prices in the current economic climate, Mulligan refrained from making predictions but pointed out the strong recovery in the physical gold market post-COVID. He noted that institutional investors are increasingly aware of geopolitical risks and the limitations of central banks in dealing with inflation or stagflation. This growing awareness could lead to a shift towards gold as a safe haven asset, especially in the face of uncertainties like the collapse of crypto markets and potential changes in US interest rates. In conclusion, the World Gold Council sees gold as a key player in the decarbonization of economies, particularly in regions like Africa where the mining industry can drive sustainable energy practices. The stable nature of gold as an asset and its positive impact on reducing carbon emissions make it a valuable addition to investment portfolios aiming to align with climate change goals.