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Decarbonisation and sector disclosures

The metals and mining sector is in the very early stages of a 30-year transitionto carbon neutral production. The roadto net zero carbon emissions, or carbon neutrality, will have a crucial impact on corporates in the sector through at least two channels: (a) through the growth in demand for various metals needed to build a green economy, and (b) through the decarbonisation of operating and business processes.

While the metals and mining sector is one of the biggest producers of carbon dioxide, emitting around 4.5Gt of CO2 equivalent per year, many of the world's largest miners haveset net-zero carbon targets,announcingprojects to 'green'the production ofaluminium, copper, steel, etc. Large-scale net-zero carbon projects remain elusivebutthe first steps to decarbonise have at least been taken.In June, for example, the Swedish consortium SSAB, LKAB & Vattenfall, produced the first hydrogen-reduced sponge iron (i.e. steel) on asmall scale.Meanwhile, alarge number of public corporates in the sector have begun toreport their carbon footprint by disclosing Scope 1, Scope 2 and in some cases, even Scope 3 emissions, although thesedisclosures aremostly voluntary and requireimprovement in the quality, frequency and credibility.

In thehighly energy-intensive aluminium industry, the most advanced companies are trying to maximise the use of renewable energy but are still far from producing 'green'aluminium across the supply chain. Projects to produce 'green' nickel and copper have been announced over the last couple of years but are still far from completion.Decarbonisation will require a huge amount of investmentinto new technologies, such as greenhydrogen production, carbon capture, storage and transportation. Technological transformation will trigger significant investment,which will be reflected in new greendebt and equity supply.

In this article, we discuss how the metals and mining sector is shifting towards carbon neutrality. We look at theemissionsproduced, the sector's current stance, the level of reporting from corporates andthe targets they have set. We also examine thesectors share in the supply of 'green' and sustainable debt in the total green finance supply, the potential amount of investmentrequired, and what it all means for investors.

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Decarbonisation and sector disclosure for metals & mining - ING Think