Miners have been warned that inadequate environmental, social and governance credentials will shut them out of off-takes in the electric vehicle supply chain, given the looming "battery passports" in Europe, which is where much of the demand is coming from.
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| Roskill principal analyst Allan Pedersen addresses an AMEC ESG forum on Aug. 11 in Perth, Australia. |
Roskill principal analyst Allan Pedersen told an Aug. 11 Association of Mining and Exploration Companies, or AMEC, forum in Perth, Australia, that ESG issues are not only non-negotiable, they will impact off-take and related financing options.
"It is my firm belief that ESG is not going to be an order winner for you or for anyone, it's going to be an order qualifier," he said. "You will not be invited to sit at the negotiation table if this is not part of your company DNA, and that you can demonstrate it."
This requirement is predominantly coming from the electric vehicle supply chain, particularly from Europe, which is aiming to cut emissions by 55% by 2030 on the way to carbon neutrality by 2050.
Pedersen said Europe's market is showing the strongest growth as global gigafactory capacity will breach 4.1 TWh by 2030, with major original equipment manufacturer, or OEM, involvement. Battery grade lithium demand will rise eight-fold by 2030, nickel sulfate demand seven-fold, and cobalt demand by 2.5 times, the principal analyst said.
"A lot of the OEMs from Europe, where much of the demand growth is coming from, are looking at all of these things," said Pedersen, who in his previous role did market intelligence for Tianqi Lithium Australia Pty. Ltd.
"The Europeans are looking to introduce a battery passport, so materials used for batteries that are imported from abroad must have a passport that shows what the [ESG] profile is."
Though the exact mechanics of the battery passport system have not yet been worked out, Pedersen said "it's coming, and it's probably coming faster than anyone really would like, but the Europeans are pushing really, really hard on this agenda."
Pedersen said the passport will not only cover emissions but also "the battery raw materials that go into it," and will ensure that the sourcing of the materials is conflict-free, and that "people have been treated right" throughout the supply chain.
It will also check whether processes throughout the supply chain are done "in line with government legislation," and that companies are a "good citizen where you operate."
As multinational law firm Baker McKenzie described in a March note, "industrial batteries and electric vehicle batteries shall have an electronic record, unique for each battery, to be identified through a unique identifier" by Jan. 1, 2026.
"The battery passport will register and provide to the public information about every battery model placed on the EU market," Baker McKenzie said.
Investor requirements
AMEC CEO Warren Pearce also told the forum that many mining companies are "using ESG, particularly their environmental credentials, to separate themselves and demonstrate they're a leading company in taking action on emissions or sustainability."
However, "over time, it's going to become the bare minimum required for you to be at the table with investors, and we've all got to remember that ultimately no one is required to invest in us. We are competing for investment with other industries, other markets, against each other, and it's up to them to choose to invest in our business."
Joanne McDonald, head of corporate affairs at IGO Ltd., Tianqi Lithium Corp.'s new West Australian joint venture partner, told the forum that her company's 2021 perception study of 22 institutional shareholders representing 35% of IGO's issued capital revealed that ESG was a "key factor" in their investment decision-making processes.
Many also stated that it would become increasingly important over time, McDonald said, adding that the survey of the institutions' investment managers and governance managers' top five ESG issues were environmental impact, greenhouse gas emissions, safety, governance and social license to operate.