Herminius was commissioned to provide a detailed understanding of provenance and ESG compliance within the metals industry, how these dynamics were evolving, and the extent to which companies were able and willing to risk-manage them. Conversations with more than 50 industry participants and stakeholders found that determining provenance was inherently problematic once metals had been refined.

In many countries, basic Anti-Money Laundering regulations were the only meaningful controls on the sector; this approach was effective, without being entirely fool-proof. In others, a combination of legal requirements, self-regulation and fear of the reputational fall-out from a “dirty metals” scandal had led companies to pay close attention to the provenance question, and while the pace of change was slower than some would like, loopholes were closing. All this said, illegally sourced metals continued to enter mainstream markets, and not even the largest and most sophisticated market actors were infallible. 

However, at the vanguard of industry best practice were a handful of well-regarded actors with strong commercial imperatives to stay clean. Having confirmed that levels of provenance and ESG risk in certain parts of the market would be beyond its risk tolerance, the client pivoted towards a different acquisition target with a strong reputation for managing these risks better than its competitors.