The energy transition has resulted in the need for substantial increases in certain minerals that are critical to its success. Resource Capital Funds (RCF) has been investing in most of these minerals for decades and we have a keen understanding of some of the challenges that expanding production will create. Electric batteries, in particular, are playing a pivotal role as the world transitions from fossil fuels, and the batteries that power electric vehicles (EVs) are particularly important.
Notwithstanding the target of net zero carbon emissions by 2050 proposed by the Paris Agreement, auto makers and many government regulators are setting more stringent goals for converting vehicle manufacturing to electric at a very rapid rate. This aggressive move puts substantial strain on already stretched critical minerals supplies. The need for increased Environmental, Social and Governance (ESG) controls is exacerbated by the fact that many of the critical minerals required come from some countries where the regulatory requirements are less well defined, or enforcement in remote mining areas is an ongoing challenge.
Every step in each mineral’s supply chain must be considered in terms of its impact on the environment, workers, and host and Indigenous communities – and they all pose significant ESG challenges and opportunities.
Why We Joined the Global Battery Alliance
RCF is focused on the ethical sourcing of mined materials and, through our portfolio company, Global Advanced Metals (GAM), has partnered with other organizations to further ESG goals, such as the Electronic Industry Citizenship Coalition (now part of the Responsible Business Alliance), to support standards for safe working conditions and ethical treatment of workers as well as the tracing of tantalum from the mine to the processing facilities. In fact, GAM was actively involved in drafting the audit protocol for the legal and ethical production of tantalum. We have also been a signatory to the United Nations Principles for Responsible Investment (PRI) since 2013, and we report to the PRI on our responsible investment activities annually.
In 2022, we joined the Global Battery Alliance (GBA), as the only private equity mining finance firm, to further that commitment and join other organizations to discuss best practices throughout the mining value chain from mine sites through to the Original Equipment Manufacturer (OEMs). The GBA – a partnership of businesses, governments, NGOs, investors, and academics – is committed to making batteries safer and more efficient to produce, while creating jobs, eliminating child labor, and protecting and respecting fundamental human rights across the supply chain.
We strive to collaborate and engage with our portfolio companies to encourage them to identify and implement responsible mining and ESG “good practices”, relevant industry standards, and commitment to creating social value into their business systems. We monitor key ESG risks and opportunities at the Fund level and encourage our portfolio companies to do the same, and we share our approach to managing key ESG themes across our business in our annual Sustainability Report.
The GBA Battery Passport: An Innovative Approach to Responsible Sourcing
One of the key accomplishments of the GBA is the creation of the GBA Battery Passport, a cloud-based store of data for each individual battery that is accessible to anyone via a QR code. This data includes:
- What that battery is made of and where its components and materials were sourced
- ESG “scores” for specific metrics including child labor, human rights, and greenhouse gas emissions
- An assessment of the level and quality of the data available for a particular battery
The GBA Battery Passport proof-of-concept pilot was rolled out during the World Economic Forum in Davos, Switzerland, this January, with Audi and Tesla providing vehicles with the GBA Battery Passport QR code attached (Audi’s parent company, Volkswagen, and Tesla are both GBA members). Anyone who scanned the codes was able to see detailed information regarding the batteries in that particular vehicle.
The GBA hopes that in the near future, consumers will be able to scan their battery’s QR code when purchasing an electric vehicle and immediately know if the battery was produced in a socially and environmentally responsible manner. The GBA will ultimately provide a Quality Seal attached to the vehicle that will provide consumers with confidence that the battery was produced ethically and sustainably.
It is expected that the European Union will require battery passports as soon as 2026, and the United States may follow suit. RCF is pleased to support this timely endeavor.
How RCF Will Contribute
One of the biggest challenges faced by the GBA is the need to collect data from across the battery supply chain and ensure that it is reliable. Accurately tracking the multitude of environmental and social risks and impacts, from the raw material stage to recycling, is a complex undertaking.
With 25 years of experience across a wide range of mined resources, RCF has a unique understanding of the critical mineral industry. Having invested in over 30 different commodities including tantalum, rare earth minerals, nickel, lithium and other metals across 50 countries, and having achieved 178 exits, we bring a comprehensive understanding and experience to the challenges involved in producing minerals that are ethical, legal, and sustainable. By sharing what we’ve learned from our investments in critical minerals projects, we can help our partners in the GBA think through issues and challenges facing the industry.
Contributing to a Just and Sustainable Future
Our involvement with the GBA is an opportunity for RCF as well.
Increasingly, OEMs are expressing concern about where they will source the growing demand for critical materials. Recent projections by AME, S&P Global and RCF estimate that over the next decade, nickel supplies will have to double, copper will need to increase by almost 50%, and lithium will require a five-fold increase.
Our involvement with the GBA will give us an opportunity to interact directly with OEMs such as Tesla, Volkswagen, and BMW and seek to create strategic collaborations where we can provide our unique expertise and assist in ensuring safe and ethical production of future supplies of these critical minerals. This collaborative approach will be essential as the world transitions away from fossil fuels.
Most importantly, our association with GBA is a chance to take a lead role in helping establish the criteria by which critical minerals producers are evaluated for responsible production. Batteries are crucial to achieving a more sustainable future; it is critical that the batteries themselves are part of a sustainable supply chain. As the only mining finance member of GBA, we are proud to contribute to this effort.
About the Global Battery Alliance
The GBA was formed in 2017 at the World Economic Forum as a public-private collaboration to help establish a sustainable battery value chain. Its 120+ members include car manufacturers and energy companies as well as miners, NGOs, governments, academic institutions, and others. To date, RCF is the only private equity company to join. For more information about the Global Battery Alliance, visit their website at www.globalbattery.org.
Important Information
This material is provided for educational purposes only and should not be construed as research. The information presented is not a complete analysis of the commodities landscape.
The opinions expressed may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and non-proprietary sources deemed by Resource Capital Funds and/or its affiliates (together, “RCF”) to be reliable. No representation is made that this information is accurate or complete. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader.
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