As countries compete for access to critical minerals, investors can help ensure the next phase of growth aligns with sustainability goals.
“Without critical raw materials, there will be no energy transition, no competitiveness, and no strategic autonomy. Unfortunately, we are now dangerously dependent on a handful of countries outside the EU for the supply of these materials.”
Such were the words of Keit Pentus-Rosimannus, Member of the European Court of Auditors (ECA), summarising its recent report on the area.
This paints a rather bleak picture of what could happen if this crucial juncture for the mining industry is mishandled.
Whether as part of efforts to temper Donald Trump’s ambitions in Greenland, negotiations to end the war in Ukraine, or discussions on how to curb China’s global dominance – critical minerals have taken centre stage.
Used in anything from electric vehicle (EV) batteries to grid storage, wind turbines and solar panels, critical resources such as lithium, nickel, cobalt, copper and a handful of rare earth minerals are becoming increasingly precious – even more so as the AI revolution continues to rage.
China’s investment in clean energy technologies has seen it dominate the field, but the battle to get hold of critical minerals is entering a new phase.
“It feels we’re at an inflection point, and if we don’t get it right, geopolitics will take over,” says Ashley Hamilton Claxton, Head of Responsible Investment at Royal London Asset Management (RLAM). “With everything going on at the moment, I’m hopeful we can bake in high sustainability standards for mining, rather than a race to the bottom enabling fast-track permitting that violates community rights.”
Autonomy and sustainability
As the ECA notes, most necessary minerals are currently mined and processed outside the EU, with supply often highly concentrated. China provides 97% of the EU’s magnesium used in hydrogen-generating electrolysers, for instance, while Turkey provides 99% of its boron (used in solar panels).
This not only poses a challenge for the EU’s strategic autonomy – highlighting the need to increase domestic production and use resources more efficiently – it also jeopardises the bloc’s chances to fulfil its sustainability targets, which include net zero by 2050 and 42.5% renewable energy by 2030.
“The geopolitical events tied to the transition and rare earth metals, coupled with increased energy demand, have really complicated the sustainability angle [of mining],” says Harry Ashman, Senior Engagement Specialist at Robeco. “As nation states seek to secure supply of metals needed for defence technologies, in particular, environmental and community concerns could be sidelined. The boom in data centre demand complicates things further.”
According to the International Energy Agency (IEA), demand for key energy minerals is growing strongly, largely driven by applications in EV, battery storage, renewables and grid networks. Lithium demand rose by nearly 30% in 2024, alongside a 6-8% increase across nickel, cobalt and graphite. Meanwhile, major supply increases were led by China, Indonesia and the Democratic Republic of Congo (DRC).
“It’s clear that minerals are absolutely part of the geopolitical tensions globally,” says Adam Matthews, Chief Responsible Investment Officer at the £3.4 billion (US$4.59 billion) AUM Church of England Pensions Board (CoEPB). “That’s nothing new, but there’s been an increase in realisation of the dependencies many economies have on what is being mined, and where.”
Rare earth mineral supply isn’t only an issue for the EU. Across the globe, reserves, production as well as refinement are dominated by a handful of countries. Between them, China (47.9%) and Brazil (22.9%) hold more than 70% of the world’s reserves. Meanwhile, production is dominated by both China and the US, with 270,000 metric tonnes (MT) and 45,000 MT respectively in 2024 – from a 390,000 MT world total. This means China produced 69% of global rare earths in 2024.
The country also dominates the refinement space, with an estimated 92% of global refining output in 2023, dipping to 77% by 2030 as countries like Malaysia and Australia increased their market share.
“Governments like China have been executing a multi-decade strategy to ensure that they have secure supply and dominate the processing, and thus are in a very strong position,” says Matthews.
“There’s still a significant amount of minerals to be extracted in different parts of the world, and the question is – are those going to be extracted rapidly and at the expense of the environment and local communities, or can they be extracted in a way that operates to the best and highest of standards, with a social licence that means companies can operate responsibly?”
This, Matthews and others argue, opens a whole world of opportunities for investors.
The golden age of responsible mining
Against the geopolitical backdrop, investors are central to the future sustainability of mining.
“It’s not about respreading what already exists, it’s about creating more supply,” says Ashman. “We need to increase the production of these metals and minerals to fuel the transition and meet growing demand, but we don’t want to be solving one problem by creating another – such as a legacy of environmental destruction.”
Though a staple in some portfolios, investors have historically been cautious, partly due to myriad risks across the environmental, social and governance spectrum. While some have “struggled” with the mining sector due to its cyclical, long-term nature, the tide could be turning, Claxton explains.
“It takes 20 years to build out a mine, and permitting is complex, so it’s just a very difficult sector to invest in,” she says. “But the confluence of events around geopolitics and the net zero agenda make it more attractive.”
Investors who traditionally did not invest in mining are now expressing an interest in gaining exposure. “But they want to do it in a responsible way,” she adds.
As such, putting the right foundations in place now is key.
“If we set good standards now, it will be beneficial in the long run and will bring more capital into the industry,” Claxton argues. “But if we don’t, you’ll see a bifurcation of sustainable and ESG investors probably shying away from investing in this area, whereas the more unscrupulous end of the financial markets will be happy to pile money in.”
It is with a view to avoiding the risks inherent in the latter scenario that the CoEPB-led Global Investor Commission on Mining 2030 was launched in 2024, aiming to define a vision for socially and environmentally responsible mining and determine the role of finance in fulfilling it.
The initiative was also a response to the failure of two major tailing dams in Brazil: Mariana in 2015, and Brumadinho in 2019 – the latter of which resulted in 272 deaths. “This served as a catalyst for institutional investors to wake up to the importance of paying close attention to the social and environmental impacts of mining,” says Rory Sullivan, Co-founder of consultancy Chronos Sustainability, which provides the secretariat to the commission.
Driven also by the need to align mining practices with the transition to a low-carbon economy, the commission mapped current and future demand for critical minerals, identifying common failings across the value chain, largely linked to governance issues.
“Rather than dealing with the symptoms, it’s about going after the causes,” Sullivan explains. “There are areas that if we can make progress on, we would deal with 70-80% of the issues that seem to recur in mining operations.”
One recommendation is around the remediation of old mine sites, while another focuses on the need to establish international institutions that can oversee the sector. To that end, a Global Centre for Peacebuilding and Business (GCPB) was launched in Cape Town this month, with a mission to tackle conflict linked to the extractives sector and “bridge peacebuilding practices with commercial realities across mining and natural resource industries”.
“Even though many companies do a good job and make positive contributions, mining gets demonised, which affects the industry’s longer-term ability to operate safely and securely and to access new resources,” Sullivan explains. “Part of the logic behind our work is to move the industry to a point where mining is seen as socially and environmentally beneficial, and economically attractive for countries and communities to host.”
Though Sullivan and his peers acknowledge the “elephant in the room” of mining’s track record, attention must focus on whether mining can be done “better”, he says.
Now supported by 120 investors, the commission recently sought feedback on its 10-year Vision for the Mining Industry and the Role of Investors, including recommendations for mining and mineral value-chain companies, as well as for stakeholder engagement and benefit sharing.
“There’s an enormous agenda for investors to play an extremely constructive role, working very transparently but determinedly with industry and governments to ensure global demand is met in the most responsible way,” says the CoEPB’s Matthews. “That requires investors to do things differently. It also requires appetite for genuine partnership, which I think you’ll see emerge in the coming months.”
He describes a “space of opportunity” where actors who are ready to adopt this mindset will benefit most from de-risking mining – meeting their fiduciary duties, and ensuring that the sector can fulfil demand, while benefiting local communities in ways it hasn’t previously.
Regulation: the final piece of the puzzle
Investors highlight the key role that supportive regulation can play in helping develop a more sustainable mining industry. Although a piece of legislation such as the EU Critical Raw Materials Act (CRMA) sets ambitious goals, some argue it isn’t entirely aligned with reality on the ground.
“The CRMA sets decent targets in comparison to today, whilst capping single country dependence at 65%,” says Robeco’s Ashman. “Given China’s dominance in the sector, that’s quite a challenge. It does present opportunities for companies that are able to bring that supply to life, but it also creates an incentive for the EU to work on how they can bring that supply to market.”
The CRMA sets that at least 10% of annual EU consumption of strategic raw materials be produced domestically by 2030, while 40% should be processed within the bloc. It also requires that 25% come from recycled sources by 2030.
Beyond these targets, the act also references the need to strengthen environmental standards, responsible sourcing and due diligence across value chains, aligning critical mineral security with the EU’s broader sustainability framework.
“Circularity is the long-term answer for many countries, but in the interim they need to ensure security and sustainability of supply,” says Sullivan. “There seems to be a lot of regulatory and policy panic to try to address challenges. This creates a real opportunity for producers in Latin America and Africa: if they can position themselves as sustainability leaders, they can gain a competitive advantage and secure long-term contracts in places like Europe, which looks set to reward that – aligning incentives and ambitions.”
In parallel with the CRMA, the EU has been pursuing strategic partnerships with resource-rich African countries, aimed not only at securing supply but supporting local processing and refining capacity. Initiatives such as the Lobito Corridor – part of the Global Gateway initiative – alongside critical minerals agreements with countries including Namibia and the DRC, are intended to help ensure more value is retained in-country rather than exported in raw form.
In a world of competing spheres of influence over mining, sustainability could become an important differentiating factor for companies that are able to meet rising demand.
“There’s enormous potential for investors to work with governments like South Africa or Brazil, seeing where there’s an alignment of expectations and a common recognition that mining needs to bring greater value at the local level – fuelled by long-term commitments from the private sector along with public finance,” says Matthews.
“We’re in a landscape of potential partnerships that can deliver that, and we’re at the beginning of exploring what that looks like.”
