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During a week-long investor trip to the Pilbara and Perth in Western Australia, we met with a large range of mining stakeholders. Our key take was that water scarcity may constrain Pilbara growth, impacting industry, communities, ecosystems and Traditional Owners.
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Additionally, Traditional Owner partnerships are shifting from consultation towards earlier involvement, shared ownership and value-sharing.
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Mining technology can improve safety, but labour constraints and workplace culture remain critical to operations and decarbonisation.
Mining sits at the centre of a complicated ESG trade off. The industry supplies the minerals and materials needed for electrification, industrial processes, manufacturing and construction, while continuing to meet the world’s current energy needs. Yet the way those resources are produced matters. Communities, workers and First Nations expect mining companies to protect the environment, respect Traditional Owner rights, uphold worker rights and safety, and take their licence to operate seriously. Mining is therefore both an enabler of economic development and the energy transition, and a source of environmental and social pressure. The relationship is characterised by genuine progress, competing priorities and persistent tensions that require careful balancing.
At Harbour, we actively invest in companies that have mining operations. This could be driven by a desire to allocate capital to future growth industries like the electrification of transportation and industry, which require large amounts of metals such as copper and lithium. It could also be driven by economic growth in China, the Middle East or Africa, with a view that this will lead to demand growth and price increases for select commodities. Understanding how the companies we invest in are making progress on difficult ESG challenges forms part of our overall company assessment. At times, the perceived ESG risks have led us to a decision to not invest in certain companies.
The Pilbara is the powerhouse of Australia’s mining sector and one of the most economically important regions in the country. Its iron ore underpins Australia’s trade with Asia, whilst LNG and lithium are both increasingly important contributors to economic growth from the Pilbara.
During a week-long investor trip to the Pilbara and Perth in Western Australia, we met with First Nations groups, unions, development corporations and mining companies. The discussions provided different perspectives on the environmental, social and operational factors shaping the region’s future.
What made the discussions compelling was the way the issues intersected. Greater industrial development requires more water; decarbonisation requires substantial new infrastructure and skilled labour; stronger First Nations participation can improve project design while also challenging established approaches to land, water and value-sharing; and new technology can reduce safety risks while changing workforce needs. In the Pilbara, ESG is not a separate overlay on mining – it is increasingly part of how projects are designed, approved and delivered. Five themes stood out.
1: First Nations partnerships are entering a new phase
Perhaps the most striking observation from the trip was how organised and commercially ambitious the First Nations groups have become. The two Traditional Owner groups we met were clear that they are not anti-mining – they want to participate in sustainable economic development on their land (Country). This marks a shift from engagement centred largely on consultation and compensation towards ownership, partnership and participation. But the shift also raises more difficult questions: who has influence over project design, how benefits are shared, and how economic development can proceed while protecting native title rights, cultural heritage, water resources and environmental values.
The Yindjibarndi organisation has developed a broad commercial portfolio spanning energy, water, construction and infrastructure. The emphasis is on building intergenerational wealth, governance capability and long-term economic independence while maintaining cultural authority and stewardship of Country.
The Kariyarra Aboriginal Corporation (KAC) is very focused on opportunities to participate in the infrastructure that supports mining and industrial activity in the Pilbara area. A key area is the proposed Budari Strategic Industrial Area which will support industries such as iron ore, minerals, oil and gas, and related heavy industrial activity. KAC is working with the State Government and mining companies to understand the infrastructure requirements and impacts associated with industrial development, in particular water and power.
Engagement with Traditional Owner groups was a key topic across all mining companies we met with, and many are focused on modernising current contracts. Importantly, several mining companies highlighted how early engagement with Traditional Owners is changing project design itself. Water management plans, infrastructure locations, mine layouts and environmental programs are increasingly being shaped through collaboration rather than consultation after key decisions have already been made.
Social licence is becoming harder to separate from execution risk. Strong Traditional Owner relationships can improve development timelines, reduce conflict and strengthen project outcomes. Conversely, poor relationships may create delays, cost escalation and reputational damage.
Progress in engagement does not mean the underlying tensions have been resolved. Traditional Owner groups continue to deal with historical grievances and proposals that, in their view, do not adequately recognise their rights and interests in land and water. While collaboration is becoming more common and the desired outcome for all, it continues alongside disputes over authority, impact and value-sharing.
2: Water - the resource behind resources
Iron ore may be the Pilbara's most visible export, but water is rapidly becoming a critical resource and a bottleneck.
Across nearly every meeting, water was identified as one of the biggest constraints on future industrial growth in the Port Hedland area and the Pilbara more generally. The Pilbara is heavily reliant on rainfall for its water supply. Existing groundwater systems are under pressure with industrial demand expected to rise significantly. This is due to ambitious plans for green steel, ammonia, hydrogen and ongoing mining activity which will require substantially more water. Inland dewatering and repurposing mine water have been considered, but cost, location and long-term reliability make desalination the long-term pathway.
The challenge is not simply one of supply. Water is an operational input, an environmental dependency and a source of deep cultural significance. A project that improves water security for industry may therefore create commercial and community benefits while also raising difficult questions about ownership, governance, ecological drawdown and the protection of culturally significant places.
The Kariyarra Water Scheme and Yindjibarndi Water provide examples of this changing mindset. Both combine commercial opportunity with cultural stewardship, while seeking to ensure Traditional Owners have governance rights and economic participation in projects occurring on their Country.
The planned Kariyarra Water Scheme would draw on a paleochannel formed within an evolving river and delta system over millions of years. Thought to hold close to 900 gigalitres of water, it could supply industry and the Port Hedland community while desalination infrastructure is developed. However, projected demand means the scheme would provide a bridge to larger-scale desalination rather than a long-term solution.
Port Hedland currently uses around 16GL of water a year, compared with projected regional demand of around 70GL within a decade and up to 200GL under higher industrial scenarios. The scheme would supply a smaller share, with a maximum of around 30 gigalitres being considered and actual use expected to be lower. Careful management of drawdown will be needed to protect surrounding ecosystems, cultural artefacts and other places significant to Kariyarra people.
The Yindjibarndi Water was described as a major pillar of their commercial portfolio. It is both a commercial opportunity and a defence of culturally significant water resources, particularly Millstream, which, along with the Fortescue River are considered unique and deeply significant cultural and spiritual places for Yindjibarndi and other Pilbara peoples. The culturally and scientifically led water study allowed Yindjibarndi to engage with government, mining and water stakeholders from a stronger evidence base.
3: The safety conversation is changing
Health and safety has long been a focus in mining, physical safety remains paramount, particularly contractor safety. Across multiple companies, contractors continue to be overrepresented in serious incidents and fatalities, leading businesses to reassess how they manage contractor relationships, incentives and oversight.
Conversations on safety are evolving and now include mental health, sexual harassment, psychosocial risks, camp accommodation and workplace culture. Companies increasingly recognise that worker wellbeing extends beyond preventing physical injury.
Technology is also playing a larger role. AI-enabled safety systems, vehicle intervention technologies and automation can remove workers from hazardous environments and engineer risk out of operations rather than relying solely on procedures and human behaviour. At the same time, technology does not resolve the underlying questions of contractor oversight, workplace culture and accountability.
Traditional metrics remain an important measure of safety performance, but our discussions suggested the conversation is shifting toward leading indicators. Contractor management, workforce culture, psychosocial wellbeing and the design of safety systems are emerging as important considerations in evaluating long term operational performance. One of the mining companies noted that their CEO is meeting with their primary contractors to discuss the trend of injury and fatalities to try and determine a better approach to safety for contract workers.
4: Union activity increasing in the Pilbara region
Port Hedland is experiencing a new phase of unionisation following decades of individual employment arrangements. The current bargaining runs through the Combined BHP Ports Unions, which includes Electrical Trades Union, the Australian Manufacturing Workers Union and the Western Mine Workers Alliance.
Renewable energy projects, transmission infrastructure, data centres and electrification of mining operations are all drawing from the same limited pool of skilled workers. This competition may constrain project delivery across the Pilbara, including the projects intended to decarbonise the region.
The unions believe the increased interest in unionisation is due to workers seeing a dilution of benefits and reduction in pay for Fly in Fly Out (FIFO) contracts. Cost of living pressures are exacerbating this dilution. There also appears to be to narrowing of the premium between Perth and FIFO work in the Pilbara. At the moment, industrial action is focused on BHP and Rio Tinto, however, all mining companies we spoke to recognise the increasing competition (although most believe it is manageable), however, they are watching the current industrial action with interest.
5: Decarbonisation continues to varying degrees
A discussion with the Pilbara Development Corporation focused on the future investment pipeline in the Pilbara. This includes investment in renewable energy, energy infrastructure, hydrogen, ammonia, e-fuels, green steel and downstream processing. These planned projects collectively exceed planned iron ore investment. Strategic industrial areas and more integrated regional power infrastructure will be important enablers.
For mining companies, decarbonisation is progressing at different speeds. Some are redesigning operations around longer-term electrification, while others are taking more conditional or staged approaches. Decarbonisation will increase near-term demand for water, power infrastructure, land, capital and skilled labour. Physical climate impacts, technology readiness, workforce constraints and Traditional Owner expectations will therefore influence not only how quickly strategies can be delivered, but whether transition projects retain their social licence as they scale.
Where to from here?
Across these themes, the same pattern recurred: the action that solves one problem can intensify another. More industrial development increases pressure on water, energy and labour; decarbonisation requires new land, infrastructure and community consent; automation can reduce physical risk while reshaping jobs; and stronger partnerships can accelerate projects while requiring companies to share more control and value. That is what makes the relationship between mining and ESG complicated – not an absence of progress, but the need to manage progress across interests that do not always align.
The Pilbara remains one of the world's most important mining regions, but increasingly its future will incorporate factors that sit beyond iron ore grades and commodity prices.
Water security, First Nations partnerships, workforce capability and safety culture are emerging as some of the determinants of successful project delivery and industry growth in the region.
The relationship between mining and ESG will continue to involve disagreement. The more important shift is that these disagreements are increasingly moving closer to the centre of commercial decision-making. Traditional Owners are participating in projects that support their communities, while a number of mining companies are giving greater weight to environmental protection, worker safety and community expectations. This does not remove the trade-offs; it makes the quality of how companies manage them a more important source of long-term value and risk.
For investors, the key is not to expect mining companies to eliminate these tensions, but to assess how well each company incorporates material ESG risks and opportunities into strategic decisions and ongoing operations. That requires ongoing stewardship focused on the quality of Traditional Owner relationships, water governance, contractor safety, workforce planning and the credibility of decarbonisation delivery – not simply the existence of policies or targets.
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This publication is provided for general information purposes only. The information provided is not intended to be financial advice. The information provided is given in good faith and has been prepared from sources believed to be accurate and complete as at the date of issue, but such information may be subject to change. Past performance is not indicative of future results and no representation is made regarding future performance of the Funds. No person guarantees the performance of any funds managed by Harbour Asset Management Limited.
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