As the global push for clean energy accelerates, so too does the demand for the minerals that power it. From lithium and cobalt to nickel, graphite, and rare earth elements, these materials are essential to the production of solar panels, wind turbines, and electric vehicle batteries.
Although the systems governing the mining from their extraction, financial, regulatory, and governance, are not keeping pace.
A new report by the United Nations Environment Program-hosted International Resource Panel (IRP) makes the case for urgent reform. Titled “Financing the Responsible Supply of Energy Transition Minerals for Sustainable Development,” the report warns that without sweeping changes, the extraction and trade of critical energy transition minerals could undermine the very development and environmental goals the world is racing to achieve.
Demand Accelerating, Risks Rising
Mineral extraction has surged in recent decades, increasing fivefold since 1970, and now accounts for 50% of annual global raw material extraction, up from 31% in 1970. This trend shows no signs of slowing. In 2023 alone, demand for key transition minerals rose between 8 and 15 percent. Demand for lithium, in particular, is expected to skyrocket, reaching levels nine times higher than 2022 production by 2050.
The report points out that managing this rapid expansion responsibly is essential to ensuring that the energy transition is both equitable and sustainable. Without major changes in how mining is financed and governed, communities and ecosystems in mineral-rich regions, especially in Africa, China, and South America, could pay a high price.
“The demand for minerals and metals needed for the energy transition requires a mining industry that contributes to sustainable development, while respecting human rights and the environment,” said Janez Potočnik, Co-Chair of the International Resource Panel.
“Through sustainable finance, responsible mining can become the default, not the exception.”
A Capital-Intensive Industry with High Stakes
Mining is a capital-intensive, high-risk sector that requires a mix of public and private investment at every stage, from exploration to mine closure, as well as upstream activities like mineral processing and refining.
The report notes that while maintaining environmental standards is perceived as expensive, most companies surveyed estimated it would increase their costs by less than 25 percent.
Even so, a majority of respondents expressed optimism that Environmental, Social, and Governance (ESG) reporting could attract new investors. This puts financial institutions in a powerful position to influence mining companies to adopt higher ESG standards.
According to the report, a combination of fiscal, financial, and monetary policies is needed to guide capital toward mining practices that are both profitable and responsible.
The International Energy Agency (IEA) estimates that achieving net-zero emissions by 2050 would require USD 450 billion in investments by 2030, rising to USD 800 billion by 2040, much of it in energy transition minerals.
The Case for Circularity
Enhancing circularity in the minerals sector could significantly reduce the pressure on virgin material extraction. The IRP suggests a wide range of measures to promote recycling and reuse — including national recycling targets, tax provisions for circular infrastructure, eco-design incentives, and green bonds to fund recycling facilities.
Yet even with ambitious circular economy strategies, the need for new mining will persist. A balance must be struck between resource efficiency and the demands of a global clean energy shift.
The report also advocates for the creation of a global database to monitor mine tailings and identify potential sources of lesser-known, minor metals. Public-private partnerships, public awareness efforts, and incentives for industrial innovation are all part of the broader strategy for reducing the environmental burden of mining.
Supporting the Sector’s Most Vulnerable Actors
Artisanal and small-scale mining (ASM), a major source of employment in many mineral-rich countries, often takes place in informal and poorly regulated environments. The report emphasizes the need to improve ESG outcomes in ASM through increased transparency, formal labor frameworks, and better access to data, funding, and technical support.
It proposes a comprehensive set of reforms: locally tailored licensing, capacity building, tax incentives, and potentially an international sustainability framework for ASM. These steps aim to bring the sector into the formal economy, where it can benefit from better protections and access to finance, while also improving its environmental and social footprint.
Rewarding Responsible Mining
One of the report’s key insights is that responsible mining often goes unrecognized and unrewarded in global markets. The IRP recommends the introduction of government-backed certification and incentive schemes, such as preferential fiscal policies and improved market access for ESG-compliant companies.
Specific recommendations include:
- Strengthening the capacity of financial institutions to identify and support high-ESG mining projects.
- Developing a digital product passport to trace ESG data across supply chains.
- Reporting financial and ESG performance on a site-by-site, gender-sensitive basis.
- Including ESG-compliant mining in official taxonomies for sustainable and climate finance.
- Allowing companies with validated ESG transition plans access to preferential financing.
- Using fiscal and financial tools to promote metal circularity.
- Creating a Mining Sustainable Development Fund, supported by a global levy, to fund training, legal aid, and innovation.
- Building equitable partnerships between mining host countries and importing nations.
These reforms aim to ensure that the benefits of mining are more equitably shared, both with producing countries and with the communities that host mining operations.
Aligning Global Governance
The report is intended to inform wider international efforts on critical minerals and sustainability. It supports the work of the UN Secretary-General’s Panel on Critical Energy Transition Minerals, aligns with the International Council on Mining and Metals’ 2024 commitment to “nature-positive” mining, and echoes resolutions from the seventh session of the UN Environment Assembly.
As demand for critical minerals continues to grow, the IRP’s message is clear: responsible mining is not optional. It is the foundation upon which a truly just and sustainable energy future must be built.
