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Earth Institute Research Projects

Mining & Water Risk: Diagnosis, Benchmarking and Quantitative Analysis of Financial Impacts

Lead PI: Dr. Upmanu Lall

Unit Affiliation: Columbia Water Center (CWC)

July 2014 - December 2017
Inactive
Global ; United States ; Chile ; Canada ; Australia ; Peru
Project Type: Research

DESCRIPTION: Columbia Water Center recently completed a three-year project sponsored by Norges Bank Investment Management (NBIM) to develop a modeling platform to quantitatively assess mining-related water and environmental risks and their financial implications.

The modeling platform provides investors access to a targeted analysis of water-related mining risk, with a high level of specificity related to the type of mining operation, geophysical and socio-political setting, remediation and mitigation needs, financial implications of particular asset risks on the broader company portfolio, and causal connections between risk factors and financial performance.

The project uses modeling tools to address elements of specific risks as well, including: meeting water requirements for mineral processing, energy production, and community needs; treatment, disposal, and re-use of wastewater; flooding and mine de-watering operations; and addressing accidents and spills. Additionally, the team considered how rights, regulations, and related governance issues pose financial risks to mining operations.

OUTCOMES: The new modeling platform provides investors access to a targeted analysis of water-related mining risk that includes:
• Relevant climate and physical data
• Analysis of the gaps in governance, monitoring, reporting, and verification
• Remediation and mitigation options
• Financial implications of particular risks at the asset and portfolio levels, especially from a
climate perspective
• Causal connections between risk factors and financial performance
• Assessment of initiatives involving local communities to avoid conflict related to water resources
• Financial modeling tools for real option analysis to account for risks related to water, climate,
commodity prices, and other quantifiable factors.

BLOG: Hurricanes Harvey and Irma Show That It’s Time for Companies to Disclose Climate Risks to Investors

For more information: http://water.columbia.edu/research-themes/risk-and-financial-instruments/water-and-the-mining-industry/

SPONSOR:

Norges Bank

FUNDED AMOUNT:

$1,962,860

WEBSITE:

https://www.nbim.no/en/transparency/news-list/2018/report-from-columbia-university-on-financial-implications-of-water-and-environmental-risks-in-the-mining-sector/

PUBLICATIONS:

http://water.columbia.edu/files/2015/05/NBIM-Synthesis-Chapter-FInal-4.11.18.pdf

http://water.columbia.edu/files/2015/05/NBIM_one-page_NEW.pdf

Legal

S. Thomashausen, N. Maennling, T. Mebratu-Tsegaye. A comparative overview of legal frameworks governing water use and waster water discharge in the mining sector.

M. Condon. American Bar Association’s Section of Environmental, Energy, and Natural Resources Law “Year in Review”, Environmental Litigation and Toxic Torts, Chapter 6

Physical

J. Ossa-Moreno, N. McIntryre, S. Ali, J.C.R. Smart, D. Rivera, U. Lall, G. Keir. The Hydro-economics of Mining

L. Bonnafous, U. Lall, and J. Siegel. An index for drought induced financial risk in the mining industry

L. Bonnafous, U. Lall, and J. Siegel. A water risk index for portfolio exposure to climatic extremes: conceptualization and an application to the mining industry

P. Larrauri, U. Lall. Assessing Risk of Mine Tailing Dam Failures

P. Larrauri, U. Lall. Tailings Dams Failures: Updated Statistical Model for Discharge Volume and Runout

J. Salem, Y. Amonkar, N. Maennling, U. Lall, L. Bonnafous, K. Thakkar An analysis of Peru: Is water driving mining conflicts?

Financial

J. Blanchet and K. Murthy. Quantifying Distributional Model Risk via Optimal Transport

J. Blanchet, Y. Kang, and K. Murthy. Robust Wasserstein Profile Inference and Applications to Machine Learning

J. Blanchet and K. Murthy. On Distributionally Robust Extreme Value Analysis

C. Dolan, J. Blanchet, G. Iyengar, U. Lall. A model robust real options valuation methodology incorporating climate risk

KEYWORDS

regulation mineral extraction finance water footprint mining legal risks environmental factors water resources water risk

THEMES

Stewardship of the planet