Investors push EV sector on responsible nickel mining

A group of financial institutions has identified electric vehicle (EV) and battery manufacturers' shortcomings as it pressures for stronger corporate actions to ensure responsible nickel mining.

The signatories directed their "expectations" at major EV stakeholders, naming global auto producers Tesla, Toyota, Hyundai Motor and BMW, as well as battery manufacturers BYD, Samsung SDI and Panasonic. The group consists of 29 investors, representing over $1.2 trillion of combined assets. It includes Dutch pension fund PGGM, Indian conglomerate Future Group, Dutch insurance co-operative Achmea and DNB Asset Management that is owned by Norway's DNB bank.

"As responsible investors, we are concerned that companies that do not proactively address the social and environmental risks with the appropriate actions put long-term value creation and investment returns at risk," said the signatories on 20 February. They highlighted concerns including deforestation, higher greenhouse gas emissions and conflicts with indigenous peoples and local communities following greater public attention.

The statement focused on nickel, among other critical minerals like cobalt and lithium, as nickel has attracted more public attention because of environmental risks associated with its extraction.

"The single-largest growth in the demand of nickel in the next two decades is expected to come from the EV industry. However environmental impacts are often overlooked in the downstream mineral supply chain policies of EV battery producers and EV manufacturers," the group said. "Downstream companies have the responsibility to ensure that environmental and social risks are mitigated throughout their nickel supply chains."

The signatories laid out three sets of expectations. They expect firms to incorporate responsible sourcing requirements in their nickel supply chains and to exercise their leverage with upstream firms to ensure responsible mining practices. Requirements include a commitment to implement and respect the free, prior and informed consent of indigenous peoples and local communities, as well as "time bound commitment" for net zero smelting and refining processes. They expect enhanced social and environmental due diligence from those stakeholders, with increased impact disclosures. They also expect "time-bound commitments" for deforestation-free nickel supply chains, citing a 2023 report by environmental group the World Wide Fund for Nature that suggested destruction of at least 273km² of forests throughout 2001-19 were caused by nickel extraction, mostly in southeast Asia.

"There is no credible pathway to net zero without halting deforestation by commercial actors by 2025," said the signatories. They expect measures by 2025 the latest from those firms to "eliminate" deforestation from their nickel supply chains.

Nickel from Indonesia has flooded the market in recent years. It added an estimated 1.17mn t of production during 2021-23, according to Australian bank Macquarie's research arm.

Australia's nickel sector has been hit particularly hard this year, as the country scrambles to provide royalty relief and include nickel in its critical minerals list to support its producers.

But a green premium on low-carbon battery grade nickel is unlikely to happen, with the Indonesian carbon footprint coming down all the time, said some market participants.

By Joseph Ho