A new report by the International Resource Panel (IRP), hosted by the UN Environment Programme (UNEP), argues that the financial system must be reshaped to channel investments towards responsible mineral extraction, ensuring that the energy transition does not deepen social and environmental inequalities that blight the sector.

The report notes that mineral extraction now accounts for half of all raw material use globally, up from 31 per cent in 1970. Extraction has risen five-fold over that period, driven in part by the growing demand for minerals like lithium, cobalt, nickel, graphite and rare earth elements – the essential components of solar panels, wind turbines and electric vehicle batteries.

Demand for these materials is expected to continue to climb steeply. In the case of lithium, projected 2050 demand is nine times higher than the world’s total 2022 production.

IRP’s report examines global patterns of demand, production, trade and investment, and identifies high-concentration mining regions across China, Africa, and South America. It finds that while the energy transition depends on the steady supply of these minerals, the mining sector must transform to meet sustainability and human rights standards.

The study emerges the week after an investigation revealed the extent of nickel mining in Indonesia’s Raja Ampat, one of the world’s most biodiverse marine reserves. It found that extraction for the mineral used in electric car batteries has endangered 2,470 hectares of coral reefs, 7,200 hectares of forest cover, and the livelihoods of over 64,000 Indigenous and local community members across archipelago. Raja Ampat was recently awarded UNESCO Biosphere Reserve status.

“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.”

Mining is among the world’s most capital-intensive and high-risk industries, relying on both public and private investment across all phases, from exploration and construction to operation and closure.

The IRP report said that this dependence on finance gives banks and investors leverage to drive stronger environmental, social and governance (ESG) outcomes throughout the sector.

A survey conducted for the report found that while many large mining companies view environmental standards as costly, most estimate that compliance would increase operational costs by less than 25 per cent. Most respondents also said that robust ESG reporting could help attract new investors.

The report urged financial institutions to develop the expertise to identify and fund mining projects that meet high ESG standards, and recommends that sustainable finance taxonomies explicitly include mining projects with validated ESG transition plans.

It also called for linking mining investments to climate and nature-positive outcomes, excluding mining from protected areas, and reporting ESG results on a site-by-site and gender-sensitive basis that respects Indigenous peoples’ rights.

The IRP report also highlighted the importance of circularity in reducing the need for new extraction. Measures such as recycling targets, government-backed financing, extended tax provisions for recycling infrastructure, and incentives for eco-design can all help limit pressure on natural resources. Green bonds and public-private partnerships could also play a role in scaling up recycling and materials recovery systems.

Still, the scale of investment needed is huge. The International Energy Agency estimates that achieving net zero emissions by 2050 will require mining investments of up to US$450 billion by 2030 and as much as US$800 billion by 2040.

Surging demand for transition minerals has helped the argument to mine the ocean floor, where an estimated US$8 trillion to US$16 trillion in reserves of polymetallic nodules lay on the bottom of the Pacific Ocean. However, a 2021 report by non-profit Planet Tracker estimated that seabed mining could create environmental damage up to 25 times greater than land-based mining.

Without directly referring to deep-sea mining, the IRP warns that investment must be directed toward operations that can prove their sustainability credentials.

Formalise artisanal mining

The report also highlights the artisanal and small-scale mining sector, which employs millions of people in developing countries but often operates informally, with significant environmental and social risks.

The IRP called for formalising labour, simplifying licensing processes, expanding access to finance, and providing technical support and training. It also called for the creation of an international sustainability framework to help small-scale miners improve standards and secure access to formal sources of capital.

To ensure that responsible mining practices are properly recognised and rewarded, the IRP suggests government-backed certification and incentive schemes, such as favourable fiscal policies and improved market access for verified, ESG-compliant operations. Responsible practices, it argues, too often go unnoticed or uncompensated in global markets, undermining progress toward sustainability.

The report proposes the creation of a global database for mine tailings – that is, the waste produced from the mining process – facilities to improve transparency and safety, and the introduction of a global levy on mining companies to fund a Mining Sustainable Development Fund. This fund would support training, capacity-building, legal assistance, and technology transfer for developing countries. It also calls for the development of digital product passports for mineral commodities, allowing ESG data to be tracked across value chains.

The report aims to feed into the UN Secretary-General’s Panel on Critical Energy Transition Minerals, which drafted a series of guiding principles on sustainable material supply chains last year, and align with new commitments made by a London-headquartered industry body, the International Council on Mining and Metals (ICMM) for “nature-positive mining.”

Guided by the Kunming-Montreal Global Biodiversity Framework, ICMM committed in 2024 to “contribute to a nature-positive future” with pledges to avoid UNESCO World Heritage sites and achieve no net loss of biodiversity by mine closure against a 2020 baseline.