UK’s biggest fund manager warns decarbonisation of the global economy is at risk.
According to Legal & General Investment Management, in a report drawn up in collaboration with miner BHP, the world will not be able to achieve the “huge increase” in the supply of industrial metals needed to reach net-zero emissions by 2050 with the current levels of investment.
They go on to estimate that the cumulative demand for copper will double over the next 30 years. In the same period demand for nickel will quadruple if we are to limit global warming to 1.5C above pre-industrial levels.
The same report highlights the challenge that institutional investors often shun the industry because of its carbon-intensive nature. It is also an industry prone to incidents and accidents, driving many of the big institutional investors to invest in loss-making clean tech or electric vehicles companies instead.
LGIM goes on to suggest there are two roles investors can play in the mining sector:
- To mobilise the capital that will be required to ensure that metal supply does not become an obstacle to achieving the goals of the Paris agreement on climate change
- To drive down operational emissions across the mining industry, where there is a big difference between the best and the worst performers
The report highlights the example of nickel, a key material in the batteries that power electric vehicles, where there is an enormous gap between an Indonesian nickel operation fed by coal-fired power and one in Canada that uses hydropower.
We are at last witnessing a realisation of the conundrum caused by the Clean Energy Transition. We all crave the outcome that clean energy promises but the practical reality is there are not enough metals in the ground to make it a reality within the timelines proposed and with the current levels of investment.
In another recent report, commodities consultant Wood Mackenzie said as much as $2tn would have to be invested in metals to achieve a 1.5C outcome.
It’s extremely encouraging to hear others laying bare the reality of the challenge we have ahead of us. We published an article recently in Forbes covering the ‘The Unseen Minerals Conundrum Of The Clean Energy Transition’.
In it, we call for urgent action to ensure we deliver the minerals required to make the clean energy transition we all crave a reality.
- Combine the usage of technologies like AI, advanced chemistry, and inverse production processes for recycling and new processes to maximize net metal production from existing assets across the entire value chain (mining, refining, recycling).
- Traceability, labelling and certification of product provenance in terms of metals and material composition based on automated data collection, analysis and updates are critical to building trust across the new materials value-chain where end users are proactive, data-driven and voicing their opinions.
- Policy and regulatory environments across all economies need to factor in a progressive framework to introduce the energy transition in a more realistic timescale while ensuring the production capacity of both primary and secondary raw materials (minerals) required are scaled up to ensure there is no hyperinflation of the underlying commodity pricing while the end-users have sufficient data to support their buying decisions.
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