Published on 17 May 2019

SUSTAINABLE FINANCE

The World Bank wants to reconcile mining and climate action

The World Bank has launched a $50 million fund to invest in mining sites in developing countries. Its goal is to support the energy transition by financing the extraction of the mines and metals needed for green energy. The plan to introduce responsible practices to a sector known for its many environmental and human rights abuses.

Mine de cuivre et d or de Grasberg en Indonesie joster69
Grasberg Gold and Copper Mine in Indonesia.
@Joster69

The World Bank will manage a fund to finance the extraction of the minerals needed for the energy transition. It has raised $50 million from private and public investors such as Rio Tinto, Anglo American and the German government, which will be invested in mines in developing countries over the next five years.

The manufacture of wind turbines, solar panels and electric vehicle batteries or energy storage requires increasing volumes of certain materials, but it is also a source of pollution. The World Bank estimates that if countries meet the objectives of the Paris Agreement, demand for minerals such as lithium is expected to increase by 965% by 2050, or 383% for graphite and 108% for nickel.

Promoting responsible practices

The new fund will focus on mine site practices to ensure that the extraction and processing of minerals and metals is environmentally sound. World Bank experts also want to intervene at the authoritative level in developing countries to improve the framework of the extraction sector and mineral transformation. Funded projects may strive to use renewable energies themselves to reduce their carbon footprint or to reduce water use and their impact on deforestation.

The road promises to be a long one for the World Bank. Mineral extraction sites for clean technologies are amongst the most controversial in terms of ESG (environmental, social, governance) risks, as illustrated in a recent study by Novethic, "The mining industry: an inexhaustible layer of ESG risks". Many of today's mining sites have a significant impact on the environment, given the specific techniques required for mineral processing.

Major ESG risks

The social aspect in mining activity is also regularly called out. Amnesty International has denounced the use of child labor for the extraction of cobalt in the Democratic Republic of Congo. The mineral is used to manufacture electric vehicle batteries. Similarly, "conflict minerals" (tin, tantalum, tungsten and gold) mined in risk areas are subject to special scrutiny, as trading them can indirectly finance armed groups. A European regulation, to go into force in 2021, will oblige companies importing these minerals to adhere to the methods of responsible sourcing outlined by the OECD.

The World Bank plans to rely on its technical experts to ensure that the projects in which the fund invests will minimize their social and environmental footprint. Nevertheless, the American organization Earthworks believes the World Bank is mistaken in its priorities. Earthworks sent a letter signed by 50 NGOs to the international financial institution, expressing their disagreement over the funding of new mining sites.

According to Payal Sampat, Director of the Earthworks Mining Program, "traditional extraction is not the answer" to the development of renewable energies. "A real climate strategy would prioritize recycling, reuse, substitution and changes in consumption habits before new mining,” he said.

Arnaud Dumas @ADumas5


© 2019 Novethic - Tous droits réservés

‹‹ Retour à la liste des articles