Climate-Smart Mining: inside the World Bank’s ambitious mining fund

JP Casey 9 October 2019 (Last Updated October 9th, 2019 10:22)

The World Bank has launched its Climate-Smart Mining Facility, a $50m fund to promote sustainable mining practices. JP Casey speaks to World Bank director Riccardo Puliti about the fund’s origins, and its aim of ensuring the sector’s environmental performance, despite changes in the industry.

Climate-Smart Mining: inside the World Bank’s ambitious mining fund
The World Bank has launched its Climate-Smart Mining Facility, a $50m fund to promote sustainable mining practices. Credit: World Bank

This year, the World Bank unveiled a new fund to support initiatives that encourage mineral extraction that is both financially prosperous and environmentally considerate. The Climate-Smart Mining Facility will see $50m invested over the next five years, in mining projects that encourage mineral extraction alongside the four key concepts outlined by the World Bank: mitigating climate change, adapting to the effects of climate change, reducing material impacts and creating market opportunities.

The project has significant industry backing, with international miners Rio Tinto and Anglo American involved in the scheme, along with the German Government, as the World Bank looks to balance sustainable economic development with sustainable environmental practices. However, while questions remain about how effective the fund can be given its short five-year time frame and the closeness of key environmental targets such as the UN Sustainable Development Goals (SDGs) in 2030, the World Bank remains optimistic that the facility can generate meaningful change in the sector.

Established ideas and forward-thinking solutions

“Climate-Smart Mining supports the sustainable extraction and processing of minerals and metals in developing countries and emerging economies, while minimising social, environmental and climate footprints,” said Riccardo Puliti, senior director and head of the World Bank’s energy and extractives global practice, highlighting the broad scope of the project, which is as ambitious as it is diverse.

Yet the ideas behind this initiative are nothing new. The fund builds on the work of The Growing Role of Minerals and Metals for a Low Carbon Future’, a 2017 report into the future of the renewable energy sector, authored by the World Bank and the International Council on Mining and Metals. The report concluded that the world will have to dramatically increase its mining and processing of a number of key minerals to provide the building blocks for the new technologies and solutions required to deliver a clean energy future.

For instance, the report found that if the world is to reach the most ambitious target set by the 2015 Paris Agreement, a restriction of temperature increase to 2oC by 2050, the rise in global demand for metals such as aluminium, cobalt and nickel will increase by up to 1,000%. This shift in mining demand will underpin the necessary increase in renewable energy generation of 44% to reach this temperature target, with a number of the minerals filling specific needs in the design and construction of renewable technology: aluminium is a key component in the metal frames of solar panels, while lithium and cobalt are vital materials used in battery technologies.

However, the threats posed to public health and the environment by mining are well-documented, with the UN’s Global Resources Outlook revealing that mining and processing activities were responsible for 53% of the world’s carbon emissions, and 20% of health impacts from air pollution. There is a paradoxical danger; as the world moves towards clean generation of energy, constructing the technology and infrastructure needed will lead to an expanded mining industry and greater environmental damage, threatening to undermine the entire project.

Preventing exploitation in developing countries

This danger is one the World Bank is aware of. “Significant challenges will emerge and the negative impacts from mining to build clean-energy technologies will increase, affecting vulnerable communities and environments and potentially hindering progress on climate change,” said Puliti. “We are working with developing countries to ensure that the clean energy value chain is low-carbon and sustainable, and metals and minerals are extracted in an environmentally-sensitive manner.”

This emphasis on developing countries is key, as they stand to be some of the most dramatically affected by shifts in mineral demands. The World Bank’s 2017 report notes that “non-renewable mineral resources play a dominant role in 81 countries that collectively account for a quarter of world GDP, half of the world’s population and nearly 70% of those in extreme poverty.”Many of these countries monopolise the world’s reserves of particular minerals, for example Guinea has the world’s largest bauxite reserves, Congo the world’s deepest cobalt deposits and Kazakhstan the world’s greatest chromium resources.

Concern persists that future developments in these countries will follow the typical pattern of investment in mineral-rich developing countries, where foreign companies pour money into the country to establish mining infrastructure, only for the profits of these operations to be withheld from the host countries. China in particular has been guilty of this , with disputes such as the Government of Chad levying a $1.2bn fine at a Chinese company for environmental violations in the country, rife .

Short-term and long-term challenges

Preventing resource exploitation will be one of the key challenges for the World Bank, as it looks to balance financial profit with environmental protection and social change. The facility will be managed by what Puliti calls a “steering committee” comprised of its donors, to ensure a range of opinions and values are involved in the decision-making process, and will specifically target regulatory change to ensure countries are not being exploited by foreign companies.

“The facility aims to ensure developing countries benefit from increasing demand for strategic minerals that are needed for the clean energy future,” said Puliti. “The facility will mobilise private capital to drive sustainable growth and innovation, assisting governments to build a robust policy, regulatory and legal framework that promotes climate-smart mining and creates an enabling environment for private capital.”

Puliti also acknowledged that ensuring this shift to clean extraction techniques will be difficult to achieve on a truly global scale, with a wide variety of mining methods, environmental regulations and social and political attitudes towards mining across the world. While the inherently global reach of the World Bank, and the fund in particular with its international donors, may alleviate this, coordinating mining practices around the world will remain a logistical challenge.

“There is a need to look at the whole mineral supply chain to minimise the impacts and promote best practices,” Puliti said. “While innovation is happening, it is often concentrated in isolated corners of the world. We need a much faster and wider spread of knowledge about best available technologies in this space, and widespread adoption of these by the mining industry globally.”

The facility’s goals were developed in line with the UN’s SDGs, and many of its broader ideas in line with the UN’s targets for improving the health of the world’s environment while ensuring social and financial developments are not compromised. The SDGs are to be reassessed in 2030, and could provide a useful indicator of the success of the World Bank project.

Puliti highlighted the scale of the rising demand for strategic minerals and metals in such a short timeframe as a key challenge for the facility. Recycling of minerals and metals will play an important role in addressing these challenges, but this is nothing new in the renewables industry. The International Energy Agency reported that global CO₂emissions soared from 20,518 million tonnes (Mt) in 1990 to 32,316Mt in 2016, before 2018 saw the greatest year-on-year rise in energy demand in a decade.

The mining industry will need rapid and sustained change to ensure a meaningful improvement to its environmental performance, and the Climate-Smart Mining Facility is the latest attempt hoping to deliver just that.