Environmental, social, and governance (ESG) impacts may limit the exploration and supply of minerals critical for energy transition, Trend reports via the latest research from the International Energy Agency (IEA).
As the demand for such minerals as lithium, nickel, cobalt, graphite, copper, aluminum and rare earth elements is about to increase, recent price hikes for many of these minerals have led to a marked increase in investment in mineral exploration and production. However, significant risks remain that mineral supplies may not be adequate to meet global climate targets.
“These include risks associated with geopolitical tensions, armed conflict, human rights violations, bribery and corruption, emissions, water stress and loss of biodiversity. These types of impacts can erode public support for mining projects, and will face increasing scrutiny from downstream industries, investors and civil society, potentially leading to short-term production disruptions and stark local and international resistance to mining investments,” the report said.
According to the IEA, businesses, especially those supporting the transition process, can make a positive contribution to sustainable development, but not without addressing the potential negative impacts associated with their activities or supply chains. The demand growth required to support the transition to clean energy also holds great promise for supporting economic development and poverty reduction. If well managed, mineral wealth can contribute to public revenue generation and decent economic livelihoods, especially when combined with stringent ESG standards, guaranteeing the protection of workers and communities against environmental and social damage.
As the researchers noted, unreliable supply chains, affected by insufficient investment, and environmental and social impacts, may limit the supply of critical minerals.
“Failure to properly manage these risks may also expose governments and companies to ESG-related regulatory, ethical and reputational criticisms,” the IEA noted.