Since the start of the Industrial Revolution in the mid-18th century, there has been an increased release of greenhouse gas (GHG) emissions into the atmosphere. As GHG emissions accumulate in the atmosphere and trap heat, global average temperatures increase.
To limit this global warming to “well below” 2°C, global greenhouse gas emissions must be decline by approximately 45% by 2030 relative to their 2010 levels. As a result, governments and private organizations are increasingly committed to decarbonization, or “net-zero.”
With the world moving toward net-zero emissions, investors also need to consider the amount of carbon emissions associated with their own portfolio. Companies with a lower carbon intensity are better prepared for what lies ahead. Companies with high associated emissions will face higher costs either due to carbon pricing and other forms of policy pressure.
The problem with gold
This presents a potential problem for investors looking for gold exposure. While all of our economic activities generate carbon, some do more damage than others. Typically, mining is seen as an activity with a higher environmental impact. [1]
The gold mining process is also very energy intensive. The extraction and grinding of ore requires almost 90,000 KJ per gram of gold produced. That is equivalent to about one day of electricity use for the average American home.[2] Therefore, there is a strong case for increasing the amount of gold we recycle. In theory, almost the entire stock of gold ever mined in human history (205,238 tonnes) can be recycled.
Recycled gold – over 90% less carbon intensive
There are two potential ways investors can reduce the carbon associated with their gold exposure.
One way for investors to reconcile this problem is to seek exposure to recycled gold. Recycled gold is over 90% less carbon intensive than mined gold.[3] Indeed, for this reason, outside of financial markets, recycled gold is becoming increasingly favoured. There is a growing amount of discarded phones and other e-waste globally, encouraging some large hardware manufacturers to opt for recycled gold. For example, Apple now uses 100% recycled gold in the plating of the main logic board and the wire in the front camera and rear cameras. According to Apple, 2.6 million tonnes of mined rock equivalent have been avoided by using recycled content in the iPhone 13. [4]
Thanks to the efforts of The Royal Mint Responsibly Sourced Physical Gold ETC (RMAU), recycled gold can now play a greater role in investor portfolios. The Royal Mint recently outlined its aims to increase its use of recycled gold on a best endeavours basis, meaning a portion of the ETC will be backed by gold bars composed of 100% recycled gold. Recycled gold is over 90% less carbon intensive than mined gold, allowing investors lower carbon exposure to this vital asset class. The Royal Mint has an extensive physical coin and bar business which it can draw upon to source recycled gold.

ESG screened gold mining
For investors looking for gold mining exposure, another potential solution is the AuAg ESG Gold Mining UCITS ETF (ESGO).
ESGO provides exposure to the gold mining industry, by focusing on the 25 best-in-class ESG rated companies in the sector. ESGO is the only gold mining ETF with an ESG screen. As a result, it has a lower carbon intensity, and turns a brown industry greener.
The ETF uses Sustainalytics to screen the mining universe for their ESG credentials, attributing a risk score based on their findings. Only the top 25 lowest ESG Risk companies are included within the index.
As well as reducing potential exposure to companies with poor governance and social adverse practices, the screen takes into account the greenhouse gas emissions (scope 1 and 2) of companies when assessing its ESG risk score.
As a result, the ETF has a lower carbon intensity than other major gold mining indices, as can be seen in the table below. Using ESGO for gold mining exposure, therefore, can reduce the overall emissions with the portfolio.
In recognition of the ETF’s sustainable profile, MSCI ESG Fund Ratings awards ESGO a AAA score. ESGO is also the only gold mining UCITS ETF with an SFDR Article 8 classification.
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*Weighted average of the portfolio companies' carbon intensities by portfolio weights. **Portfolio Financed Emissions divided by the sum of revenues attributable to the portfolio. Portfolio Finance Emissions are the owed emissions for all securities in a portfolio
The ETF is also equal weighted. This helps to avoid concentration risks. The probability of having, for example, two companies with a combined weighting of 25-35% is relatively high in a market/liquid weighted index for a single sector. In addition, the possible underweighting of a few dominant mega-companies may also provide a beneficial return profile for AuAg ESG Gold Mining UCITS ETF in a bull market for gold and gold miners.
Avoiding transition risk
By investing in these low carbon solutions, investors can not only align their portfolios with their values and avoid being caught out by exposure to assets with a high carbon intensity. By including RMAU or ESGO in a portfolio for gold exposure, investors will be able to report a lower average carbon intensity for their portfolios, reducing both transition and reputation risk.
Please remember that when you invest in ETFs and ETCs your capital is at risk.