As the global economy accelerates its shift toward a low-carbon future, strategic minerals have emerged as the backbone of the energy transition. In its latest whitepaper, “The Strategic Minerals Conundrum – How to Achieve the Transition to a Low-Carbon Economy”, our partner J. Safra Sarasin offers a comprehensive and timely perspective on one of the most pressing dilemmas in sustainable investing today: how to meet the surging demand for metals and minerals without undermining environmental or social principles.
A supercycle driven by decarbonisation
Materials such as lithium, cobalt, copper, nickel, and rare earth elements are indispensable in powering electric vehicles, producing batteries, and enabling renewable technologies. According to estimates cited in the whitepaper, demand for these minerals could quadruple by 2040, a direct result of countries aligning with the Paris Agreement and investing heavily in clean energy infrastructure.
This demand is not abstract. A single electric vehicle, for instance, requires double the amount of copper used in a conventional car. Wind turbines rely on rare earths, and battery storage systems are impossible without lithium and cobalt.
A sector under pressure: ESG challenges in focus
J. Safra Sarasin’s whitepaper is clear about the costs involved. The mining and processing of strategic minerals are associated with significant environmental and social challenges.
Mining generates vast amounts of waste, consumes precious water resources, and is responsible for nearly 10% of global greenhouse gas emissions. Many operations are concentrated in fragile environments or developing countries where human rights abuses, poor labour conditions, and lack of oversight are widespread.
“Mining and mineral processing generate substantial waste and greenhouse gas emissions, use large quantities of water and potentially toxic chemicals. They are also linked to many human rights abuses,” the authors write.
These concerns underscore why sustainable investors cannot afford to ignore the upstream risks in the materials value chain.
The role of investors: three pillars for responsible action
Rather than turning away from the sector, J. Safra Sarasin advocates for a pragmatic, proactive approach, grounded in sustainability.
The firm outlines a three-pronged investment strategy:
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Select best-in-class companies: Firms with strong governance, transparent ESG reporting, and alignment with international sustainability standards.
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Engage to improve: Active stewardship to address weaknesses in supply chains and encourage more responsible practices—particularly on human rights and environmental impacts.
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Invest in solution providers: Support companies involved in recycling, materials science, and circular economy models that reduce dependence on raw extraction while applying a value chain approach to better identify and assess the companies best positioned to drive the transition to a low-carbon economy.
This approach is backed by the bank’s proprietary Sustainability Matrix®, which evaluates companies and sectors on both ESG risk and performance, enabling more nuanced investment decisions.
A new geopolitical map
Beyond sustainability, the report delves into the geopolitical implications of mineral dependence. Resource extraction and refining are heavily concentrated in a few countries—most notably China, which controls up to 90% of rare earth refining and holds a dominant position in lithium and cobalt processing.
This has led to growing strategic concern in Europe and North America. The European Union’s Critical Raw Materials Act and the US Inflation Reduction Act both aim to reduce dependency and stimulate domestic and diversified supply chains.
But global competition for access is increasing. As the paper notes, “mineral-rich countries will gain importance on the global stage and shift power dynamics in their favour.”
Scaling circularity and innovation
Recycling and substitution technologies are seen as critical to mitigating future supply bottlenecks and ESG concerns. However, recycling rates remain low—less than 1% for lithium, for example—highlighting the need for investment in new processes and infrastructure.
Innovation is also gaining traction. Technologies such as sodium-ion batteries offer a viable alternative to lithium-based systems and are less reliant on scarce or geopolitically sensitive materials.
Advances in material efficiency—like reducing the use of silver and silicon in solar panels—have already made a measurable impact and illustrate how smart design and innovation can reduce overall mineral intensity.
A balanced path forward
J. Safra Sarasin concludes with a nuanced but hopeful view: strategic minerals are both a risk and an opportunity for investors. The key lies in understanding the complexity of the sector, supporting companies that are leading the shift toward responsible practices, and actively engaging with those that lag behind.
“Solving the strategic minerals conundrum means finding the mid-point between the inevitable energy transition and minimising negative effects of mining in a pragmatic approach.”
Investors who can combine long-term vision with active stewardship have a powerful role to play in shaping a more resilient and sustainable resource economy.
This whitepaper is an essential read for any investor or institution looking to navigate the intersection of sustainable finance, global supply chains, and climate-driven innovation. Access the full whitepaper from J. Safra Sarasin here