Modern economies rely on critical minerals. They are essential to make mobile phones, laptops, robotics, fibre optics, medical devices, batteries and much more. They are also key to green energy infrastructure – lithium, nickel and cobalt for electric vehicles, rare earth elements for wind turbines or silicon for solar panels.

Transitioning economies globally to net zero by 2050 could lead to a six-fold increase in demand for critical minerals from 7.1 million tonnes (Mt) to 42.3 Mt, according to the International Energy Agency.

To meet this surge in demand, miners need to invest an unprecedented amount of capital in a short space of time. According to estimates, close to two trillion dollars is needed to supply key energy transition metals by 2035.

Miners are likely to turn to financial markets, such as London, to raise part of this sum. London has a long history of providing financing and related professional services to mining companies. Investors will require increasing assurance that critical mineral projects meet environmental, social and governance standards before they invest.

This article suggests three actions miners can take to gain better access to funding in London:

London will be one of the key centres for sustainable financing

London has been the leading financial and professional services centre for the mining sector for many years.

By the scale and quality of financing provided, London is ahead of other centres for mining finance. In early 2023, the London Stock Exchange (LSE) hosted the world’s top diversified mining houses with a combined market cap of over $300 billion, ahead of Sydney’s nearly $275 billion and Toronto’s less than $170 billion. London is where most globally significant mining deals were transacted and where many prominent miners go to raise capital for large projects.

The City has a large base of specialist mining professional services expertise such as lawyers, bankers, advisers and accountants to support such transactions.

London's position as the premier centre for mining finance is closely linked to the London Metal Exchange that provides liquidity in the trading of many minerals and provides the City with price discovery and sophisticated knowledge on commodity pricing and purchasing trends. The industry’s governing body – the International Council on Mining and Metals – has also chosen London as its headquarters.

London’s role started to shift more rapidly to align with the focus on sustainability after 2019, when the UK became the first major economy to commit in law to net zero by 2050.

In the Green Finance Strategy and the subsequent Greening Finance: A Roadmap to Sustainable Investing, the UK government set a target for London to become a centre for sustainable finance and channel investment into projects and technology that support the transition to net zero. This will be achieved by:

While the detail and implementation arrangements for some reporting standards are still being finalised, other requirements are in place or well known, for example:

In addition, the Greening Finance report indicates that “certain firms will be required to publish transition plans that align with the government’s net zero commitment or provide an explanation if they have not done so”.

Investors now consider climate risk and opportunity when deciding where to put their money.

What does sustainable finance mean for critical minerals?

Miners take their responsibilities to the environment, society and governance (ESG) increasingly seriously as they respond to both internal and external stakeholder concerns. However, minimising or avoiding some ESG-related risks for miners can be difficult depending on where their assets are located.

Critical minerals are often found in countries where there have been reports of child and forced labour, corruption and financial crime as well as land degradation and water stress – particularly for lithium where water requirements are high.

For these reasons, critical minerals mining is not considered a sustainable activity under the EU taxonomy.

The EU taxonomy provides a guide for investors and financial institutions to help them define sustainable activities. It was developed to support the EU’s goal to scale up investment in sustainable projects and accelerate the transition towards a low-carbon economy.

The recent publication of the EU Critical Minerals Act is an important step as it considers projects with high ESG credentials to be included as ‘Strategic projects of importance’, which should help to secure funding. However, the exclusion of critical mineral projects from the EU taxonomy raises the question of how owners of projects with robust ESG frameworks can deliver a large volume of critical minerals in short time if their access to important investor pools, such as those in the EU, is limited.

After Brexit, the UK onshored the EU Taxonomy and will continue to build on it.

Another challenge is that ESG disclosures need further development. Currently, there are over 30 ESG-related independent standards and monitoring frameworks that a mining organisation may need to implement.

The lack of ESG-wide consolidated and widely adopted standards brings additional challenges. It can lead to ambiguity over which guidelines to implement. For international businesses disclosures are even more complicated as different rules apply in different markets where the company has a presence. This makes it more difficult – from an investor perspective – to compare projects fairly and effectively. This could in turn lead to critical mineral projects failing to attract necessary financing on time.

How can critical minerals miners improve access to funding?

The good news is that global sustainability standards are coming. The International Sustainability Standards Board (ISSB) is developing global baseline standards for sustainability, building on the work of the TCFD and other voluntary standards schemes. The UK will adopt the ISSB-issued standards when published.

Miners can act now to comply with the existing standards and meet the new requirements promptly and fully when they come into force. Below we outline three areas to focus on.