The global shift towards green energy is not just a trend but a necessity driven by the urgent need to mitigate climate change. This transition involves moving away from fossil fuels and embracing renewable energy sources such as wind, solar, and hydroelectric power.
This shift requires significant investment to support the production of critical minerals, which are essential for the technologies that enable green energy. But if we aren’t careful, that investment could have dire consequences for workers, communities, and local ecosystems.
The first landscape report of the Global Investor Commission on Mining 2030 is therefore timely, highlighting both the systemic importance of the mining sector, and the vital need to make sure mining happens responsibly.
The need for critical minerals
Critical minerals such as lithium, copper, cobalt, nickel, and rare earth elements are the backbone of green technologies. They are used in the production of batteries for electric vehicles, wind turbines, solar panels, and other renewable energy systems. The demand for these minerals is expected to skyrocket as the world intensifies its efforts to reduce carbon emissions.
The Mining 2030 Landscape Report summarises the challenge well. The International Energy Agency (IEA) expects demand for lithium to rise by a factor of 30 and rare earth metals will increase by a factor of 10 by 2030. A report by Benchmark Minerals states that meeting demand for batteries alone will require over 300 new mines.
However, the supply of these minerals is not keeping pace with the growing demand. This supply-demand imbalance poses a significant risk to the global energy transition. Increased investment in mining projects, innovative technologies for mineral processing and enhanced recycling efforts will be needed at a pace and scale the world has never seen.
Responsible mining of transition minerals
The extraction of critical minerals will inevitably happen to support the green energy transition, but it must be done responsibly to minimise adverse environmental and social impacts. This means minimising environmental damage, providing meaningful and safe employment for local communities, and ensuring the needs and concerns of local communities are addressed.
Verifying that companies are living up to high standards will be vital for investors to feel confident investing in the sector. That is why I represent the finance sector on the Board of the non-profit Initiative for Responsible Mining Assurance (IRMA). Over the past 20 years, IRMA has created the world’s leading standards and guidelines for responsible mining. These standards cover various aspects, including environmental protection, labour rights, community engagement, and ethical business practices.
Mining companies seeking assurance against these standards participate in an independent third-party assessment of mine sites to evaluate their performance against the IRMA standard. This process helps identify areas for improvement, and because the assurance reports are public, it helps ensure transparency and accountability in mining operations. I know first-hand that this is vital for building trust among stakeholders, including communities, workers and investors.
Protecting human rights in mining
Protecting human rights is a core component of the IRMA standard. The mining sector has a long history of human rights violations, including land grabbing, forced displacement, and environmental contamination. This highlights the ongoing challenges and the need for stringent human rights protections in the mining sector.
Some of the most vulnerable people are Indigenous communities. A significant portion of the world’s critical minerals is located on or near Indigenous lands. Research indicates that approximately 54% of mining projects for clean energy minerals overlap with Indigenous territories. These lands are not only rich in minerals but also hold immense ecological and cultural value. Mining in these regions frequently causes disputes with Indigenous communities striving to protect their land and lifestyle.
Not only can that create conflict within and between communities and other stakeholders with long-term consequences; it can disrupt production, increase costs and even result in mine closure. This underscores the importance of ensuring that mining operations are conducted in a manner that respects the way of life and rights of Indigenous peoples and supports them to thrive in their communities and share the benefits of mining.
The role and importance of investors
Investors can play a pivotal role in promoting responsible mining and good corporate practices. By prioritising investments in companies that adhere to high standards, investors can drive positive change in the mining industry. Institutional investors in particular can have significant influence and can use their leverage to encourage companies to apply responsible practices, adopt mine site assurance and provide transparency for all stakeholders.
Even investors who do not directly invest in mining companies can encourage purchasers of mined materials to incorporate high standards into their contracts with suppliers. Car companies, computer manufacturers, renewable energy firms and construction companies all purchase mined materials at high volumes and can apply pressure and incentives for mining companies to raise standards.
The green energy transition is crucial for a sustainable future, but it hinges on the responsible extraction of critical minerals. As investors, we can promote ethical mining practices, help ensure that operations respect human rights and Indigenous territories and support a just transition in the mining sector.
