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In brief

  • With the global transition to an energy system based on renewables expected to lead to a sharp increase in demand for critical minerals, the mining sector may provide attractive investment opportunities. Quite simply, without mining companies and the metals they produce, there can be no clean energy transition.

  • Mining companies raise concerns for investors due to the potentially negative environmental and social impact of their operations. While these issues cannot be ignored, we also recognise the progress that some mining companies are making in terms of the sustainability of their operations, as well as the vital contribution they are making to the energy transition. Despite its limitations, we believe that proactive engagement can lead to more favourable outcomes from a sustainability perspective than blanket exclusions.

  • At J.P. Morgan Asset Management we have developed criteria for including mining companies in certain sustainable funds.1 This piece outlines the framework defined and utilised by portfolio managers for evaluating companies mining for critical energy transition minerals in the context of these specific funds. We only include companies that meet strict environmental and social standards, are involved in the extraction of energy transition minerals, and are willing to engage with us regularly on material and relevant sustainability issues.

Why are mining companies important for investors interested in sustainable investing?

As more countries take steps to address the physical and transition risks posed by climate change, measures to decarbonise national economies are increasingly being implemented, often in the form of replacing fossil fuel energy with clean or renewable energy. The challenge of transitioning to a lower-carbon energy system is complicated by projected simultaneous growth in the global population and energy demand. Since clean energy technologies such as wind and solar power, electric vehicles (EVs), and electricity networks require significantly larger quantities of metals than traditional energy generation, our current carbon-intensive economy is likely to become much more metals-intensive.

Attempts to try to cater for this rise in future demand are emerging – for example, in the form of metals recycling. However, it is unlikely that the need for miners producing key energy transition metals such as copper, nickel, lithium and aluminium could be completely negated.2 Mining companies could therefore see a sharp rise in long-term demand for certain commodities as the world transitions to a cleaner and more developed future economy. In the context of our sustainable funds, we believe this demand for transition metals should be met in a manner that minimises the adverse environmental and social impacts with which mining companies have historically been associated. Some investors may wish to direct investment towards mining companies making efforts to acknowledge these impacts and increase the sustainability of their operations, while contributing to the needs of the transition.

Take the transition from internal combustion engine (ICE) vehicles to EVs, for example. A standard EV requires five times more minerals than a conventional car, with the International Energy Agency (IEA), in its sustainable development scenario for reaching net zero, forecasting that the supply of lithium would need to rise by a factor of 40 to meet future EV demand – along with a comparable jump in supply for other metals.3

Clean energy generation requires a similar increase in metals usage. An onshore wind farm requires around nine times more mineral resources to build than a natural gas plant4 – but, due to the intermittent nature of renewable power generation backup power or energy storage is still needed in systems with a lot of renewables. As a result, 1 megawatt (MW) of wind or solar energy cannot be considered as a like-for-like replacement for existing natural gas power generation, which is flexible and can provide electricity on demand. Either renewables must be supplemented by additional storage infrastructure, which itself is highly metals intensive, or extra renewable capacity must be built to smooth out gaps in energy generation. Both options would further increase the amount of metal needed.5

Can miners contribute to positive sustainable outcomes? 

As key enablers of the energy transition, we believe that miners can contribute to the efforts to achieve positive environmental outcomes, but only if they appropriately manage their impact on the environments and communities in which they operate.

Investors should look to ensure that the mining companies in which they invest have business models that seek to mitigate adverse outcomes and any form of significant harm as far as possible. The emergence of industry best-practice can also help to guide the assessment of environmental and social issues as they relate to individual companies.

Moreover, mining companies also have the potential to create positive social outcomes for the communities in which they operate. The need for good long-term relationships with, and co-operation from, local communities means that mining companies are often incentivised to prioritise social projects, creating potential benefits for community wellbeing and development overall. This “social licence to operate”, which can be essential for natural resources companies operating in multiple, often remote regions around the world, can include contributions to the provision of infrastructure, water, power, and even healthcare and schooling, with positive social outcomes extending to job creation and skills training in local areas.

Infrastructure investment associated with mines needs to be carefully regulated and monitored to minimise any environmental harms. We use the criteria outlined in the section below to carry out this monitoring and assessment. However, this is also an example of how mining companies can potentially boost local employment and growth prospects, in line with the objectives of United Nations Sustainable Development Goal 8 to provide decent work and economic growth – often in areas where alternative job opportunities are scarce.

J.P. Morgan Asset Management’s criteria for including miners in sustainable funds

Mining companies involved in the extraction of critical minerals have a vital role to play in the transition towards a more sustainable global economy, but they can also contribute to adverse impacts on society and the environment. To mitigate the risk of a company that we invest in causing significant environmental or social harm, when we assess the eligibility of a mining company for our sustainable funds, we ask ourselves four main questions:

The first question, regarding thermal coal extraction, is the most straightforward to assess, as we apply exclusionary criteria based on revenue thresholds to thermal coal across our sustainable product range.6 However, the second question, regarding the sustainability of a company’s operations with regards to the environment and local communities, is much more nuanced. Assessing whether a company is operating responsibly requires a review of its current policies and procedures, as well as its past practices, to give us confidence in the appropriateness of including it in a sustainable fund.

On the environmental side, three of our key considerations are: carbon intensity; water use; and biodiversity. As well as contributing to the energy transition, mining companies should be demonstrating clear evidence of efforts to improve their environmental profile. In terms of carbon intensity, our view is that mining companies should be actively targeting a reduction in their own carbon footprint and should set both short- and long-term goals to benchmark progress. In terms of water use, we expect mining companies to report on volumes used, especially where they are operating in water stressed regions, and to implement targeted policies for water reduction. And finally, in terms of biodiversity, we expect companies to have procedures for reducing adverse impacts, with leading companies showcasing plans for improving biodiversity on the sites of their operations.

When it comes to the responsibility that companies have to local communities, since the concept of the social licence to operate is crucial for mining companies, we assess whether a company has made a commitment to free, prior and informed consent, and whether it aims to maintain non-controversial relations with communities.7 We further expect management to ensure that operational safety is prioritised at the highest levels of the organisation, and we require companies to have robust anti-bribery and corruption controls. We identify and track such issues through controversy screening, our 40-question analyst checklist, monitoring of earnings releases, engagements with management and, when relevant, sustainable classification documents.

If a company meets our expectations on the sustainability of its operations, our third question asks whether its products are helping to solve global sustainability challenges. In the case of miners held in our sustainable funds, the focus is on the role they can play in facilitating the clean energy transition. We look not only at a company’s current mineral production mix, but also at capital expenditure. For example, we will tend to favour companies either with a larger exposure to copper, or with plans to increase that exposure via targeted investment, due to the significant need for copper in electrification and the importance of electrification as a strategy to reach net zero goals.

Our fourth and final question relates to shareholder engagement. Given the risks surrounding the operations of mining companies, we aim to establish an ongoing dialogue with investee companies. Engagement allows us to monitor companies’ progress on their sustainability commitments and to encourage continued improvement on environmental and social practices, while maintaining our investment in the resources needed for increased global deployment of clean technologies.

Energy transition case study: Anglo American

Anglo American is a global mining company with exposure to metals needed for the energy transition, such as copper, nickel and platinum group metals. As well as producing resources important for the transition, the company has committed to a full exit from thermal coal, set Scope 1, 2 and 3 decarbonisation targets, and made investments and established partnerships with renewable energy companies across Chile, South Africa and Australia. The result is that almost 100% of Anglo’s current mining production is set to be powered by renewable electricity by 2030.

The company has also made pioneering investments in hydrogen trucks (pictured) to replace its current diesel trucks, and a sizeable portion of its capital expenditure is allocated to “future enabling products”, emphasising its commitment to a decarbonised and sustainable business model. The company has further committed to achieving a net positive impact on biodiversity across its operations, including both site rehabilitation and ecosystem improvement.

In terms of ensuring its social license to operate, Anglo American runs programmes aimed at increasing access to education for children in the communities where they operate. In South Africa and South America, the company supports more than 600 schools and aims to invest US$61 million by 2027 to improve educational outcomes in their South Africa-based programmes. The company has also set a target to support five jobs off site for every one job on their sites in communities where they operate by 2030. By the end of 2023, they had supported 139,308 jobs through socioeconomic development programmes, including 2.4 offsite jobs for every one on site job.


Miners involved in the extraction of critical minerals are an important component of the transition to a low-carbon economy. These businesses support demand for green energy and mobility, which will increase exponentially over the next decades. Given their large scale and global reach, mining companies that prioritise sustainability in their operations have the potential to contribute not only to the clean energy transition, but also to the realisation of other sustainable outcomes, such as those outlined by the United Nations Sustainable Development Goals. For miners to be credibly included in certain sustainable funds, however, we use robust criteria to assess companies on both environmental and social aspects, and seek to engage regularly with company managements to ensure progress and accountability on these crucial issues.

1 “Sustainable funds” refers to our internal category of “best-in-class” sustainable funds, which, among others, set defined thresholds for company exclusions. The inclusion of a company in a sustainable fund does not denote its categorisation as a “sustainable investment” as defined under EU SFDR. These funds also allow for the inclusion of “improvers” and companies making a contribution to sustainability objectives such as the low-carbon energy transition, even if these companies cannot qualify as “sustainable investments”. These companies are being robustly assessed from a sustainability perspective for their contribution to the clean energy transition, and not as “sustainable investments” as defined under EU SFDR.
2 For further detail on what constitutes an energy transition metal, see “The Role of Critical Minerals in Clean Energy Transitions”, International Energy Agency (Paris, 2022).
3 “The Role of Critical Minerals in Clean Energy Transitions”, IEA (Paris, 2021). The IEA has developed a range of scenarios based on different assumptions around variables, including national and international policy ambition, financial sector investment, socioeconomic circumstances and climatic changes. The Stated Policies Scenario takes into account the policies and implementing measures affecting energy markets that had been adopted as of end of September 2022. The Sustainable Development Scenario assumes that concerted policy efforts speed up innovation timelines for new energy technologies. The requirement for minerals differs depending on the scenario used.
4 “The Role of Critical Minerals in Clean Energy Transitions”, IEA.
5 Cembalest, M. “Eye on the Market Outlook 2023: The End of the Affair”, J.P. Morgan (January 2023).
Our best-in-class funds apply a maximum 20% of revenue threshold for exclusion of companies involved in thermal coal extraction as part of our ESG Minimum Safeguards. In the context of best-in-class funds, these thresholds are intended to mitigate the risks associated with investing in companies exposed to unsustainable activities not contributing to the low-carbon transition by excluding companies generating revenue from these activities. The focus of this piece is on mining companies whose products and services can be viewed as making a productive contribution. Exclusion thresholds are subject to revision
7 Free, prior and informed consent (FPIC) is a specific right granted to Indigenous Peoples recognised in the UN Declaration on the Rights of Indigenous Peoples (UNDRIP) which allows them to provide or withhold/withdraw consent, at any point, regarding projects impacting their territories.