While the war in Ukraine has focused the attention of markets on the EU’s dependence on Russian oil and gas, it has also highlighted the scale of Europe’s reliance on strategic rivals for critical minerals.

EU sanctions against Russia’s mined and refined materials remain a possibility. But even if not, companies will be eager to reduce their dependence on Russia and its ally, Belarus, amid reputational and disruption risks. 

As noted by Rory Clisby, Senior Analyst on our Climate and Resilience Team, new sources for minerals such as potash, palladium, refined copper and refined nickel will be required urgently if the war continues. EU importers will also need to tap alternative markets for other materials traditionally imported from Russia, including iron ore, phosphate rock, aluminium, and manganese, as well as less-heralded transition metals such as selenium, a vital solar panel input.

EU member states will also be reluctant to turn to strategic rivals such as China for replacement imports. This will force companies into lesser-known markets where the regulatory environment is not as mature - notably including Southeast Asia and sub-Saharan Africa - raising the potential exposure of supply chains critical to manufacturing, the green transition and food production to a wider set of ESG risks.

Miners in particular will be under pressure to meet rapidly growing demand while adhering to international ESG standards. For mining, threats to natural capital are a key challenge, but labour rights and human rights could also enter the equation, and the reputational risks associated with biodiversity and other environmental and social risks in supply chains will need to be managed appropriately.

Alongside the rise of new benchmarks such as the Taskforce on Nature-related Financial Disclosures (TNFDs) and a slew of new laws around forced labour in supply chains, growing investor scrutiny of natural capital illustrates the necessity of identifying ESG risks early. Doing so will enable organisations and commodity investors to avoid muddying the clean energy transition and polluting supply chains.

Our new Industry Risk Analytics tool – which measures 51 separate risks for 198 countries across 80 sectors - identifies the different levels of risk that exist for extractive companies across the globe. 

This tool will enable mining companies, investors (as well as prospective customers) to proactively identify ESG risks and trends using an industry-specific lens. 

And the sooner identified, the more likely mitigated.