BlackRock says investors should not shun mining in net zero transition

The world's largest asset manager, BlackRock, has said that "outdated" views on mining could hamper the transition to net zero.

Rather than shunning big metals and mining companies, investors should invest heavily in the industry giants to speed up the energy transition, BlackRock's global head of thematic and sector-based investing argued.

Evy Hambro, global head of Thematic and Sector based investing and team leader for the Natural Resources team for BlackRock's Active Equity Group said that investor "disdain" for mining is starving the sector of much-needed equity and is increasingly translating into a shortage of key metals, which are vital for green technology capabilities.

“If investors don’t give this sector a chance, then the energy transition is going to be impeded by the scarcity of materials to build everything required,” Hambro said. 

Hambro has got skin in the game, as fund manager of BlackRock's BGF Mining Fund range, which manages close to $7bn in assets and invests predominantly in global mining stocks. The biggest positions in the fund are BHP, Glencore, Vale SA, Rio Tinto and Freeport, according to Morningstar data. 

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Hambro comments come amid a stark increase in demand for critical minerals to support the energy transition, sparking warnings that a green commodities crisis might be around the corner, as reported by Net Zero Investor. 

The mining sector poses a challenge to climate-focused investors as it tends to have a detrimental impact on schemes' carbon footprint.

Many large mining companies, however, including BHP, Rio Tinto, Glencore, Anglo American and Vale, have made record profits in recent years and are expected to head for a boom as the demand for metals such as copper, iron ore and nickel is likely to explode in the coming years.

This led Hamro to say that "investors are missing a big opportunity to profit from the energy transition."

He added: “Our view from speaking to our clients and investors at large is that the opportunity within this space has been massively overlooked.”

Hambro addressed investors directly by saying: “If you’re focused on sustainability, if you’re focused on the energy transition, don’t overlook this area. There’s a huge value opportunity.”

Adding to that, Hambro stressed that “if we’re just simply stopping burning fossil fuels for the production of energy and continuing to burn them for the production of materials, and we need a lot more materials, then we’re not actually going to solve the challenge that we face."

But some asset owners are acknowledging the importance of mining, at the same time, they emphasise that remaining invested alone will not be good enough. They stress the importance of engaging with mining firms to change their business practices. 

One of those voices is the Church of England Pensions Board chair Adam Matthews, who earlier this year launched a new investor commission to raise mining sustainability standards by 2030. 

"To achieve net zero requires an expansion of mining. And yet, the industry will not be able to expand without managing inherent systemic risks from tailings dams prone to collapse, to the impact of automation on workforces, to the relationships with artisanal miners and where mining contributes to, or drives conflict," Matthews argued.

He added: "These are sector wide issues that require systemic responses if mining is to secure the trust of society to catalyse the flow of capital required for its expansion."

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