The battle for critical minerals

Growing competition for critical minerals threatens to exacerbate negative climate, human rights, and biodiversity impacts. Dana Barnes and Elissa El Moufti explore the need for enhanced transparency to promote responsible practices and minimise the risks to companies and investors.

As demand for electric vehicles and other clean technologies accelerates, the race to secure supplies of lithium, nickel and cobalt is intensifying. These minerals are deemed ‘critical’ for the transition to a low carbon economy, but with China currently dominating critical mineral processing, other countries are scrambling to catch up. Investors and companies also need to understand and prepare for the potential risks.

Tech companies have already started to think about the impact of critical mineral availability. The failure to secure a reliable supply may hamper production, or expose a company to sudden price increases for vital minerals. We recommend that companies, with board oversight, establish strong risk management systems that include mineral dependency metrics for relevant business units, ensuring that financial models consider extreme but possible disruption scenarios.

Many demand-side companies, such as auto manufacturers, are taking unprecedented steps to secure critical minerals for their products. This is changing the traditional supply chain for minerals sourcing, as demand-side companies become directly involved in the mining of minerals. This creates new opportunities, but also presents new areas of risk.

For example, the increase in demand for critical minerals, if not properly executed, could have negative environmental impacts. These include increased greenhouse gas emissions, biodiversity loss and land use change, water stresses and pollution. Mining and processing activities generate a significant amount of waste, some of which are hazardous to human health and may impact local communities.

EOS at Federated Hermes Limited has been engaging on minerals since 2017, when we focused on responsible cobalt sourcing. Since then, we have developed a dialogue with companies along the supply chain and across multiple sectors, including technology hardware and equipment, transportation, and mining.

To find out more, read the full article in our Q1 2025 Public Engagement Report.