The UK's Role in Advancing Responsible Transition Minerals Supply Chains

The UK government has emphasised the importance of ‘levelling the playing field’ for responsible companies to mitigate environmental, social and governance (ESG) risks affecting the mining and processing of minerals needed for the energy transition. Yet there is little research into the levers available to the UK to realise this ambition. This paper examines the UK’s role as a financial and trading hub for the mining industry, and a centre of sustainability and international development expertise, assessing how far these have been, and could be, leveraged to improve standards.

The paper finds that the UK has yet to establish a strong policy programme to promote ESG standards. Notably, the government is not yet working to leverage the benefits brought by the confluence of the UK’s position as home of the City of London, its status as host of the London Metal Exchange (LME), its expert sustainability community, and its international development expertise.

London remains an attractive place for mining companies to access financial and other professional services, with ESG an ever-higher priority for UK-based investors. Yet public listings are declining, with significant risk perceived on the potential for ‘knee-jerk reactions’ by domestic investors. A lack of action to resolve this tension risks undermining both the UK’s sustainable sourcing ambitions and its role as a financial hub for mining.

Meanwhile, the LME has global reach, and its standards are a benchmark for transactions worldwide. Efforts have been made to engage with the sustainability agenda, but action is constrained by the LME’s need to compete with rival exchanges that have not imposed responsible sourcing rules.

In parallel, with a range of world-leading research institutions and consultancies, the UK enjoys unrivalled ESG expertise, as well as an established international development record. While the UK government retains the capability to directly support ESG initiatives in mineral-rich developing countries, it does not currently prioritise this.

Across all these areas, the UK has yet to engage actively with China – the dominant player in the transition minerals sector – to a sufficient extent. Key options remain unexploited around domestic UK standards and regulation; direct bilateral engagement with China; and work with Chinese companies operating in official development assistance (ODA)-eligible countries.

To realise the potential of the levers available to advance ESG standards for transition minerals, this paper makes the following recommendations:

• The UK government should improve the domestic regulatory environment to encourage investment in responsible mining companies. It should ensure alignment with the EU’s Corporate Sustainability Reporting Directive, Corporate Sustainability Due Diligence Directive and Conflict Minerals Regulation, and move quickly to develop a version of the EU Batteries Regulation.
   
• The UK government has indicated its interest in regulatory alignment with Taskforce on Nature-related Financial Disclosures (TNFD) approaches. It should move rapidly to integrate these approaches into policy, thereby improving perceptions of the UK’s consistency and reliability as an investment hub.
   
• The UK government should support prioritisation of responsible transition minerals mining operations among the UK ESG investment community. It should include criteria for responsible transition minerals mining and processing in a green taxonomy, in alignment with International Council on Mining and Metals Position Statements and TNFD approaches.
   
• Consideration should be given to strengthening responsible sourcing criteria in public procurement programmes to boost demand for sustainably sourced minerals and processed products.
   
• The UK government should adopt a more muscular use of ODA to strengthen ESG standards in the sector. Building on the recognition of this potential shown in the UK’s 2023 White Paper on International Development, detailed plans should be elaborated, with relevant timelines and levels of investment specified.
   
• In elaborating options for ODA use, the government should leverage previous UK experience supporting minerals governance in countries such as the Democratic Republic of the Congo, noting the long-term approach required to engage with a sector at the heart of local political economies. It should draw on the experience of countries such as Germany to produce a more ambitious Critical Minerals Strategy, with greater detail on ODA use in this area.
   
• The UK government should consider whether its existing portfolio of international development agencies and companies could support mining sustainability. These platforms offer a wealth of experience that could be brought to bear on improving ESG performance internationally.
   
• The UK government should work to leverage the benefits brought by the confluence of the UK’s expert sustainability community, and its status as host of the LME and the City of London, to develop a coherent vision for its approach to ESG in transition minerals supply chains. Proactive government leadership is urgently required to ensure cross-fertilisation between these areas.
   
• The UK government should instigate consultations between the major mining exchanges to facilitate alignment on ESG performance. This could cover exchanges such as AIM (formerly the Alternative Investment Market), the Toronto Stock Exchange, the Johannesburg Stock Exchange and the Australian Securities Exchange.
   
• The UK government should support uptake by Chinese investors of International Finance Corporation Performance Standards, notably 5, 6 and 7, as well as TNFD-aligned approaches. Efforts to this end could leverage UK relationships across Chinese financial hubs, alongside engagement as part of global meetings such as the Convention on Biological Diversity (COP16).
   
• Amid geopolitical tensions over green technology supply chains, the UK government should invest in trust-building efforts with China, strengthening technical dialogue on mutual interests in mineral-rich countries. This should be undertaken with the proviso that many Chinese stakeholders fear that sustainability measures aim to disadvantage Chinese companies, rather than improve ESG performance.