Mining and metals companies that have established tough carbon reduction goals are hoping to cash in on the burgeoning market for sustainably produced raw materials.

. This story is part of a series of articles examining the net-zero climate pledges of companies across a range of sectors. Click on the links below to see other stories in the series as they become available. Overview: Stakeholders demand action on ambitions as pledges swell Oil and gas: Oil, gas industry on trajectory to miss 2-degree climate goal Mining: Drive to lower emissions pays in metals, mining sector Utilities: Progress by US utilities 'too slow' Healthcare: EU pharma accelerates pledges while US plays catch-up Technology and media: Plenty of 'E', but less 'S' or 'G' in tech, telecom Banking: Banks' pledges come with reluctance to ditch polluters .

S&P Global Market Intelligence found that 21 of the 30 largest metals and mining companies by market capitalization have set some level of net-zero greenhouse gas emissions target or are already claiming carbon neutrality, hoping to prove their commitment to reducing their emissions. Companies are feeling the pressure from customers with their own carbon reduction goals to get in line with the global reductions called for in the Paris Agreement on climate change.

Going green comes with expensive up-front costs, and in some cases new, lower emissions technologies will need to be invented to squeeze out the carbon. But there is an upside: Socially conscious investors and funds are looking to put money into companies with low emissions, increasing their valuations. And customers are willing to pay more too. The price of Good Western-origin premium duty paid in-warehouse Rotterdam aluminum was nearly 11% higher for a zero-carbon product, according to S&P Global Platts' low-carbon and zero-carbon aluminum benchmark price assessment published Dec. 9.

"There is a bottom-line imperative that you are going to be able to access a higher price," said Paul Bendall, global leader of mining and metals at PwC Australia. "You will have a cascading pricing structure based on the provenance of the metal and how much energy is used and where the energy came from."

Squeezing out the carbon

Downstream customers are demanding their suppliers shrink their carbon footprints, and mining companies are starting to respond. The five largest mining companies by market capitalization as of Sept. 30 — BHP Group, Rio Tinto Group, Vale SA, Glencore PLC and Freeport-McMoRan Inc. — all committed to eliminating or offsetting their Scope 1 and Scope 2 greenhouse gas emissions by 2050 or sooner, according to a Market Intelligence analysis.

They may be rewarded by customers demanding greener products. End users are behind the drive to eliminate fossil fuels from the steelmaking process, a representative of Swedish steelmaker SSAB AB, which aims to bring fossil-fuel-free steel to the market by 2026, told Market Intelligence earlier this year. The SteelZero Initiative, a consortium of builders and property developers, is using its buying power to push steelmakers into cutting their emissions. Meanwhile, a joint venture of Alcoa Corp. and Rio Tinto is selling sustainable aluminum, attracting large buyers such as Apple Inc. and Audi. Executives with steel producer Nucor Corp. said on an October earnings call that the first customer of its net-zero steel product, General Motors Co., can count the product as a key part of reducing its total greenhouse gas emissions.

Makers of aluminum, which has an energy- and emission-intensive production process, are ready to cash in.

"If you consider where carbon is going in the world, we think it's positive for the industry and it's positive for the environment," William Oplinger, CFO and executive vice president for aluminum maker Alcoa, said at a Dec. 1 conference.

Companies hope to reap the benefit from investors too. Arizona Sonoran Copper Company Inc. plans to make the Cactus Copper Project in Arizona into a net-zero mine, chasing higher valuations. According to PwC, mining companies with high environmental, social and governance ratings provided 10% higher shareholder returns during the COVID-19 pandemic. The report described attention to ESG issues as one of the sector's "most significant opportunities for long-term value creation."

"Have a good story. Tell it well," Bendall said. "You'll be rewarded at the register."

It ain't easy goin' green

Still, several factors complicate the decarbonization of mining operations. Digging material from the earth tends to be energy-intensive, and mining companies must locate their operations where the resources are, often in remote corners of the planet, with limited access to renewable energy and no major companies to share in installation costs.

Miners and processors struggle with tracking and reporting their emissions. Companies pick and choose which information to reveal. The diversity of operations makes standardizing reports challenging.

Figuring out Scope 3 emissions reductions could be the most difficult part for miners aiming to hit net-zero targets, as it requires the coordination and cooperation of a variety of companies in a wide range of jurisdictions up and down the value chain.

"It is difficult," Bendall said of reducing Scope 3 emissions. "That doesn't mean they won't get there."

Moscow-based PJSC Alrosa sends rough diamonds from its mines to polishing factories abroad. Calculating and tracking the emissions those factories produce to include in the world's largest diamond miner's Scope 3 emissions — those created by assets owned by other companies — presents a challenge, said Peter Karakchiev, head of international relations at Alrosa. Even if the factories want to reduce emissions, some are located in places where access to renewable energy is limited or unavailable.

Alrosa does not currently have a net-zero goal, but it is working on targets expected to be made public in the first quarter of 2022 that will cover Scope 1, 2 and 3 emissions, said Karakchiev.

The company uses renewable hydroelectricity to power some of its operations and is exploring other sustainability-focused technologies such as storing carbon dioxide in the tailings from its diamond mining operations, Karakchiev said. However, many of the technologies needed to reduce mining sector emissions are not yet mature, the Alrosa representative added.

Mining companies collaborate

Mining companies are now working together to set climate and related environmental goals as investors and activists increasingly pressure companies to act.

"It's time to go from pledges to products," said Lisa DeMarco, a senior partner and CEO of climate change and clean energy-focused law firm Resilient LLP.

In 2020, the National Mining Association, a U.S. miners trade group. established a task force of its members' CEOs dedicated to leading on a range of ESG issues that increasingly were being closely examined by investors. In October, the International Council on Mining and Metals, a trade association focused on sustainable development, rolled out a pledge committing many of the most prominent metals and mining companies to rein in Scope 1 and Scope 2 emissions by 2050, with plans to take aim at Scope 3 emissions in the near future.

"We recognize that mining is an energy-intensive industry and global action is needed to reduce greenhouse gas emissions and help mitigate the adverse effects of human impacts on climate change," said Conor Bernstein, a spokesperson for the National Mining Association. "Much remains to be determined on the pathway to emissions reduction, but it's clear the mining industry is committed to helping deliver solutions."

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S&P Global Market Intelligence and S&P Global Platts are owned by S&P Global Inc.