As the clean energy transition continues to gather pace, demand for key minerals is expected to grow significantly over the coming years. In a recent report on the mineral requirements to support this energy shift, the International Energy Agency (IEA) noted that in 2020 clean energy demand accounted for 29% of lithium supply, yet by 2050, that number is expected to grow to 92% of demand. Similarly, clean energy demand for cobalt is projected to grow from 15% to 69%, while demand for nickel is projected to grow from 8% to 61% during this time.
The growing demand for these critical materials that will help build the energy transition requires significant investment into mining exploration and development projects so that supply will be able to match demand. Recognizing this critical shift in the mining and metals space, investors are likewise looking for tools to help them access the major themes relating to the energy transition.
‘Exposure to climate themes’
The international community is being called upon for more coordinated and focused measures in response to climate change. As such, investors in mining have a critical role to play in the energy transition as they are the ones providing the funding needed to mine more metals and minerals that will help drive this change.
Over the past few months, we’ve seen the launch of three significant funds that are focused on this very issue – the VanEck Green Metals ETF (GMET) which launched in November 2021, and BlackRock’s BGF Climate Action Multi-Asset Fund and the BGF Climate Action Equity Funds, both of which were launched in December 2021.
The goal of these funds is to expand investor exposure to the major climate themes relating to the energy transition and provide access to the companies that will produce the metals that are the gateway to green energy. Brandon Rakszawski, senior ETF product manager at VanEck noted to Businesswire that, “New technologies, from electric vehicles to offshore wind farms, cannot function without green metals such as lithium, copper, zinc and manganese. As governments around the world mandate and consumers embrace these shifts to lower carbon approaches, demand for these metals is only expected to increase.”
The VanEck GMET fund joins the VanEck Environmental Sustainability Fund (ENVIX) as part of the global investment manager’s ESG-driven lineup of solutions for investors that are focused on decarbonization and the energy transition. To qualify for inclusion in GMET’s portfolio, a business needs to demonstrate that they can generate at least 50% of revenues from green metals or that they have mining projects with the potential to do so in the future. This includes companies involved in the production, refining, processing, and recycling of green metals, including cobalt, copper, lithium, rare earths, and zinc.
BlackRock’s two new funds help to form part of their active sustainable range for the EMEA region, integrating ESG criteria into their investment decisions. The BGF Climate Action Multi-Asset Fund will be investing in a broad range of asset classes while the BGF Climate Action Equity Fund will invest in a more concentrated portfolio of equities. According to their factsheet, these funds incorporate “ESG considerations throughout the investment process’ macro outlook, idea generation, implementation tools, portfolio construction, risk management, ongoing monitoring, and reporting”.
Speaking to ESG Today, Tom Holl, Portfolio Manager, Fundamental Equities at BlackRock, noted that the fund’s investment strategy approach “harnesses BlackRock’s extensive thematics expertise with the aim of meeting the returns expectations of sustainability-minded investors”.
These funds join a growing set of industry initiatives that are the key to linking the investment community’s climate priorities, investment goals, and international decarbonization benchmarks to create a more sustainable mining and investment industry moving forward.
