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Ethical Supply: The Search for Cobalt Beyond the Congo

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The following content is sponsored by Fuse Cobalt.

Ethical Supply: The Search for Cobalt Beyond the Congo

Ethical Supply: The Search for Cobalt Beyond the Congo

Each new generation finds new uses for materials, and cobalt is no exception.

Historically, potters and painters used cobalt as dye to color their work. Today, a new cobalt supply chain is emerging to build the next generation of clean energy.

However, there is lack of transparency surrounding the current supply chain for cobalt, as the metal is subject to a number of ethical issues from its main country of production—the Democratic Republic of Congo (DRC).

Today’s infographic comes to us from Fuse Cobalt and uncovers the potential for new sources of cobalt beyond the Congo.

Cobalt’s Growing Demand

Cobalt’s specialized properties make it crucial for rechargeable batteries, metal alloys, and EVs:

  • Thermal stability
  • High energy storage
  • Corrosion resistance
  • Aesthetic appeal

As the markets for EVs and rechargeable batteries grow, the demand for cobalt is expected to surge to 220,000 metric tons by 2025, a 63% increase since 2017.

But can industry meet its demand with a supply of ethically mined cobalt?

A Precarious Supply Chain

In 2019, the DRC produced 70% of global mined cobalt—a majority of which went to China, the leading importer of mined cobalt and an exporter of refined cobalt.

Moreover, 8 of the 14 largest cobalt mines in the DRC are owned by Chinese companies, resulting in a highly controlled supply chain.

Why the Democratic Republic of Congo?

When it comes to cobalt reserves and concentrations, DRC looms over the rest of the world as a clear leader.

CountryCobalt reserves as of 2019 (tons)
Congo (Kinshasa)3,600,000
Australia 1,200,000
Cuba500,000
Philippines260,000
Russia250,000
Canada230,000
Madagascar120,000
China80,000
Papua New Guinea56,000
United States55,000
South Africa50,000
Morocco18,000
Rest of the World500,000
World total (rounded)7,000,000

The African Copper Belt hosts the majority of the DRC’s cobalt deposits, where it is primarily mined as a by-product of copper and nickel mining.

Low labor costs, loose regulations, and poor governance in the DRC allow for the flourishing of artisanal mining and cheap sources of cobalt.

However, cobalt from the DRC is tainted by ethical and humanitarian issues, including:

  • Child labor
  • Corruption
  • Crime
  • Poverty
  • Hazardous artisanal mining

With the current supply chain of cobalt facing scrutiny and criticism, a transformation in the cobalt universe is well underway.

Cobalt’s Changing Landscape

As consumers become aware of the dirty costs of cobalt mining in the DRC, battery and EV manufacturing companies are looking for ethical sources.

Tesla, BMW, Ford, and Volkswagen are part of more than 380 companies that have committed to responsible sourcing through the Responsible Minerals Initiative. Responsible sourcing entails increasing supply chain transparency and searching for sources of cobalt outside the DRC.

Here’s how some companies are leading the way:

  • Ford, Huayou Cobalt, IBM, LG Chem, and RCS Global are using blockchain technology to improve transparency and trace the sources of cobalt.
  • BMW signed a $110 million deal for cobalt from Morocco’s Bou Azzar Mine, in an effort to avoid cobalt sourced from the DRC.
  • Tesla agreed to buy 6,000 tonnes of cobalt annually from Glencore, a multinational company financing North America’s first cobalt refinery.

The U.S. recently added cobalt to its list of critical minerals—minerals for which it seeks independence from imports. The effort aims to reduce its net import reliance of 78% for cobalt, encouraging more localized and reliable production.

As a result of these shifts, the entire supply chain is beginning to reconsider cobalt sources in better-managed jurisdictions.

Cobalt Beyond the Congo: Why Not North America?

North America has comparable sources of cobalt to what is found in the Congo. As of 2019, Canada had 230,000 tons in cobalt reserves, whereas the U.S. had 55,000 tons.

Canadian Opportunity

Ontario hosts some high-grade cobalt deposits such as the Cobalt Silver Queen, Nova Scotia, Drummond, Nipissing, and Cobalt Lode mines.

In fact, Bill Gates, Jeff Bezos, and other billionaires from the Breakthrough Energy Fund are already fueling the exploration and development of cobalt deposits in North America.

Unsung North American Potential

The United States is home to 60 identified deposits of cobalt. These sources along with Canada’s deposits, should provide explorers and miners with a massive opportunity to develop cobalt mining in North America.

As the EV industry booms with gigafactories in construction, will North American carmakers and other battery makers be able to pivot to ethical, local raw materials?

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An Introduction to MSCI ESG Indexes

With an extensive suite of ESG indexes on offer, MSCI aims to support investors as they build a more personalized and resilient portfolio.

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An Introduction to MSCI ESG Indexes

There are various portfolio objectives within the realm of sustainable investing.

For example, some investors may want to build a portfolio that reflects their personal values. Others may see environmental, social, and governance (ESG) criteria as a tool for improving long-term returns, or as a way to create positive impact. A combination of all three of these motivations is also possible.

To support investors as they embark on their sustainable journey, our sponsor, MSCI, offers over 1,500 purpose-built ESG indexes. In this infographic, we’ll take a holistic view at what these indexes are designed to achieve.

An Extensive Suite of ESG & Climate Indexes

Below, we’ll summarize the four overarching objectives that MSCI’s ESG & climate indexes are designed to support.

Objective 1: Integrate a broad set of ESG issues

Investors with this objective believe that incorporating ESG criteria can improve their long-term risk-adjusted returns.

The MSCI ESG Leaders indexes are designed to support these investors by targeting companies that have the highest ESG-rated performance from each sector of the parent index.

For those who do not wish to deviate from the parent index, the MSCI ESG Universal indexes may be better suited. This family of indexes will adjust weights according to ESG performance to maintain the broadest possible universe.

Objective 2: Generate social or environmental benefits

A common challenge that impact investors face is measuring their non-financial results.

Consider an asset owner who wishes to support gender diversity through their portfolios. In order to gauge their success, they would need to regularly filter the entire investment universe for updates regarding corporate diversity and related initiatives.

In this scenario, linking their portfolios to an MSCI Women’s Leadership Index would negate much of this groundwork. Relative to a parent index, these indexes aim to include companies which lead their respective countries in terms of female representation.

Objective 3: Exclude controversial activities

Many institutional investors have mandates that require them to avoid certain sectors or industries. For example, approximately $14.6 trillion in institutional capital is in the process of divesting from fossil fuels.

To support these efforts, MSCI offers indexes that either:

  • Exclude individual sectors such as fossil fuels, tobacco, or weapons;
  • Exclude companies from a combination of these sectors; or
  • Exclude companies that are not compatible with certain religious values.

Objective 4: Identify climate risks and opportunities

Climate change poses a number of wide-reaching risks and opportunities for investors, making it difficult to tailor a portfolio accordingly.

With MSCI’s climate indexes, asset owners gain the tools they need to build a more resilient portfolio. The MSCI Climate Change indexes, for example, reduce exposure to stranded assets, increase exposure to solution providers, and target a minimum 30% reduction in emissions.

An Index for Every Objective

Regardless of your motivation for pursuing sustainable investment, the need for an appropriate benchmark is something that everyone shares.

With an extensive suite of ESG indexes designed specifically for sustainability and climate change, MSCI aims to support asset owners as they build a more unique and personalized portfolio.

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Tracked: The U.S. Utilities ESG Report Card

This graphic acts as an ESG report card that tracks the ESG metrics reported by different utilities in the U.S.—what gets left out?

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NPUC Utilities ESG Report Card Share

Tracked: The U.S. Utilities ESG Report Card

As emissions reductions and sustainable practices become more important for electrical utilities, environmental, social, and governance (ESG) reporting is coming under increased scrutiny.

Once seen as optional by most companies, ESG reports and sustainability plans have become commonplace in the power industry. In addition to reporting what’s needed by regulatory state laws, many utilities utilize reporting frameworks like the Edison Electric Institute’s (EEI) ESG Initiative or the Global Reporting Initiative (GRI) Standards.

But inconsistent regulations, mixed definitions, and perceived importance levels have led some utilities to report significantly more environmental metrics than others.

How do U.S. utilities’ ESG reports stack up? This infographic from the National Public Utilities Council tracks the ESG metrics reported by 50 different U.S. based investor-owned utilities (IOUs).

What’s Consistent Across ESG Reports

To complete the assessment of U.S. utilities, ESG reports, sustainability plans, and company websites were examined. A metric was considered tracked if it had concrete numbers provided, so vague wording or non-detailed projections weren’t included.

Of the 50 IOU parent companies analyzed, 46 have headquarters in the U.S. while four are foreign-owned, but all are regulated by the states in which they operate.

For a few of the most agreed-upon and regulated measures, U.S. utilities tracked them almost across the board. These included direct scope 1 emissions from generated electricity, the utility’s current fuel mix, and water and waste treatment.

Another commonly reported metric was scope 2 emissions, which include electricity emissions purchased by the utility companies for company consumption. However, a majority of the reporting utilities labeled all purchased electricity emissions as scope 2, even though purchased electricity for downstream consumers are traditionally considered scope 3 or value-chain emissions:

  • Scope 1: Direct (owned) emissions.
  • Scope 2: Indirect electricity emissions from internal electricity consumption. Includes purchased power for internal company usage (heat, electrical).
  • Scope 3: Indirect value-chain emissions, including purchased goods/services (including electricity for non-internal use), business travel, and waste.

ESG Inconsistencies, Confusion, and Unimportance

Even putting aside mixed definitions and labeling, there were many inconsistencies and question marks arising from utility ESG reports.

For example, some utilities reported scope 3 emissions as business travel only, without including other value chain emissions. Others included future energy mixes that weren’t separated by fuel and instead grouped into “renewable” and “non-renewable.”

The biggest discrepancies, however, were between what each utility is required to report, as well as what they choose to. That means that metrics like internal energy consumption didn’t need to be reported by the vast majority.

Likewise, some companies didn’t need to report waste generation or emissions because of “minimal hazardous waste generation” that fell under a certain threshold. Other metrics like internal vehicle electrification were only checked if the company decided to make a detailed commitment and unveil its plans.

As pressure for the electricity sector to decarbonize continues to increase at the federal level, however, many of these inconsistencies are roadblocks to clear and direct measurements and reduction strategies.

National Public Utilities Council is the go-to resource for all things decarbonization in the utilities industry. Learn more.

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