Rising Risks: Clean Tech Investors Grapple with Mining's Dark Side

According to a recent study conducted by the Business & Human Rights Resource Centre’s Transition Minerals Tracker, investors in clean technology face an increasing array of risks due to the supply chains that support these products. The report, which is updated annually, sheds light on the human rights implications of mining six minerals critical to the energy transition: cobalt, copper, lithium, manganese, nickel, and zinc. Since the end of 2022, the Business & Human Rights group has identified a staggering 65 new allegations of human rights abuses, bringing the total number of recorded abuses since 2010 to a troubling 510.

These findings are in line with Europe’s efforts to enact landmark legislation that would hold companies, including financial institutions, accountable for violations that occur throughout their value chains. The Corporate Sustainability Due Diligence Directive was recently approved by the European Parliament and is now on its way to the European Council. However, various interest groups are actively lobbying for its final wording to be weakened.

The expansion of wind, solar, and electric vehicle production, which serves as the foundation of clean technology, will necessitate a significantly greater quantity of minerals and metals than traditional combustion-powered technology. According to the World Bank, by the middle of the century, demand for raw materials needed for the green transition will have increased by 500%. With new legislation such as the US Inflation Reduction Act increasing demand for clean technology, the pressure on mineral supply chains is expected to increase.

Concerns have been expressed by responsible investor groups that funds ostensibly allocated to protect the environment may inadvertently result in severe social consequences. The Business & Human Rights group emphasizes the growing problem of corruption in the field of transitional mineral mining, which is frequently linked to human rights violations. Surprisingly, the group reveals that in 2022, less than half of the companies linked to allegations of abuse will have implemented human rights policies.

Vice President of the European Parliament Heidi Hautala emphasized the importance of new legislation, such as the Critical Raw Materials Act, to compel mining companies to improve their practices. Hautala stated in a statement accompanying the report that it is critical to take steps to secure global mineral supply chains and reduce demand for new minerals in order to relieve pressure on local communities in resource-rich countries.

Finally, the Business and Human Rights Resource Centre’s Transition Minerals Tracker study highlights the growing risks that investors in clean technology face due to the associated supply chains. With an alarming number of allegations of human rights violations and an urgent need for minerals and metals driving the demand for clean tech, responsible investing and strong legislation are critical to ensuring that the energy transition is ethical and sustainable.