Introduction:
Overall mining contributes approximately 7- 8% of Global GHG emissions. This is substantial, however, must be balanced against the fact we need many critical minerals and metals, in order to move to a low-carbon economy.
As an example, electric vehicles use 6-7 times the amount of critical metals vs a conventional car.
The mining industry is very global and it is certainly not a one-size-fits-all industry, therefore Sustainable Finance can help Mining companies in their sustainability journey so lets take a deeper look.
Green vs Transition:
In our view we don’t think mining is inherently green.
However, as noted above it is needed for a low-carbon economy. Our view is that mining is more accurately described and positioned as a transition and a hard to abate sector.
Decarbonization Solutions:
As we can see below this is a great graphic of the different solutions available to decarbonize mining (Source: Mineral Council of Australia).
In relation to different solutions, mining is very diverse and we must consider different geographies, geologies, commodity/metal and also the specific resource.
Solutions include; renewable energy, energy efficiency, plus using hydrogen for machinery and trucks. Companies can also consider approaches to changing the mix of a portfolio, acquiring or divesting assets.
There are also a number of measures to drive efficiency such as AI and different types of scanning plus automation. Waste management, trailing and general processing are depending on type of commodity and metal and needs to be considered.
Broader Sustainability Issues in the Mining Sector:
Whilst decarbonization is a key issue for mining, the other key Sustainability issues include; biodiversity, local communities, and water.
Some commodity groups and metals have very low direct emissions in their extraction, however, can have large scope 3 emissions.
Mining is definitely not a one size fits all
Best Resources:
Transition Pathway initiative: https://www.transitionpathwayinitiative.org/publications/57.pdf?type=Publication#:~:text=The%20Transition%20Pathway%20Initiative%20(TPI,efforts%20to%20address%20climate%20change.
Climate Council of Australia: https://www.minerals.org.au/sites/default/files/MCA%20Climate%20Action%20Plan_Progress%20Report%202021.pdf
IEA: https://www.iea.org/reports/the-role-of-critical-minerals-in-clean-energy-transitions
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Outlook and Looking Ahead:
To date we have seen some mining companies transact Sustainability Linked Loans using ESG Risk Ratings. Changes to drive margin changes.
We are yet to see any major mining companies announce Sustainability Link Bonds, and let hope we can see this soon.
More recently just seen Fortescue from Australia publish a use of proceeds based green and social framework which is well worth a read.
We hope mining takes more centre stage in Sustainable Finance. We need critical minerals and metals to move to a low-carbon economy
We love heavy metal music and also the heavy metals and commodities we need that will help us transition to NetZero.
