Fitch Ratings-London-08 July 2020: The 2020 metals and mining survey, 'Emerging ESG Risks in the Metals and Mining Value Chain' - a collaboration between Fitch Ratings and CRU - highlighted water scarcity as the greatest emerging risk to the metals and mining sector, according to investors. Pressures such as localised water shortages and competition for water are likely to increase in the coming decades, causing increasing challenges for battery and low-carbon technology production.
Mining often faces operational risks with regard to water supply, and is one of the most water-intensive industries. Although efforts have been made to increase the efficiency with which the industry uses water, more and worse droughts and greater competition for water resources are posing growing challenges. The industrial utilisation of water is often constrained before the water demands of other sectors, such as agriculture.
Overall demand is forecast to rise by as much as fivefold for some metals by 2025, according to CRU, driven by increased applications in batteries, renewable energy and other green technologies. However, there are growing social and environmental constraints on production that threaten to make many projects unviable in the coming years. These may begin to disrupt dependent supply chains and products - a particular concern given the time and costs required to develop large-scale solutions such as desalination and wastewater recycling.
A major emerging concern for the sector is the management of mine tailings and its storage in tailings dams. A number of high-profile mine disasters from tailings dams highlight the need for the sector to consider ESG risks when making investment decisions. These events have led to rating downgrade actions, and investor scrutiny of wastewater and waste stewardship has subsequently increased across the sector, in line with a general trend of increased mitigation costs relating to water and wastewater management. These mitigation costs account for a growing portion of total operating costs.
Associate Director, Sustainable Finance
+44 20 3530 1942
- Risk Mitigation Strategy
- Risk Assessment
- Water Risk
- Risk Management
- Climate Risk