The global shift to clean energy is driving the increasing demand for critical minerals, such as lithium, copper, cobalt, graphite, and nickel. These minerals are key for clean energy technologies ranging from electric vehicle batteries to solar PV plants and wind farms.

However, the exacerbating climate crisis is also putting the production of critical minerals at risk. A study released last year by PwC found over 70% of copper, cobalt and lithium output could face significant or higher drought risk by 2050. Similarly, a quarter of the world’s copper mining projects are at increasing risk from extreme rainfall by mid-century, found another study by Verisk Maplecroft and Costmine Intelligence.

Such climate risks can impact the broader critical mineral supply chains by affecting production capacity, increasing operational costs, and supply shortages, says Bruno Livi, risk consulting leader at Marsh Advisory. With offices in over 130 countries, Marsh, a unit of Marsh McLennan, is an insurance broker and risk advisor that helps businesses understand and manage their risk exposure, including from climate change.

It has become essential for mining companies to take the necessary steps to adapt to a changing climate and build climate resilience. Kallanish spoke to Livi to learn more about the climate risks faced by mining companies and how companies like Marsh are helping miners analyse and mitigate climate risks.

 

➡️ Tell us more about Marsh.

Marsh is a global leader in insurance broking and risk management, with a rich history spanning over 150 years. We provide innovative solutions to help clients navigate complex risks across various industries and our expertise lies in understanding the unique challenges faced by our clients and delivering tailored strategies that enhance their resilience and operational efficiency. With a presence in over 130 countries, we use our global network and local insights to support businesses in managing risks effectively.

 

➡️ What are the most pressing climate risks currently faced by mining companies and how do these vary by location, the type of mineral, or the type of mining operation?

Mining companies face a wide range of climate risks, including inland flooding, coastal flooding, extreme heat, tropical cyclones and water scarcity. These risks can vary significantly based on geographic location, the type of mineral being extracted, and the mining operation itself. For instance, operations in arid regions may experience heightened water scarcity, while those in tropical areas may be more susceptible to flooding and landslides.

 

➡️ How do these climate risks impact the broader critical mineral supply chains?

Climate risks can disrupt critical mineral supply chains by affecting production capacity, increasing operational costs, and leading to supply shortages. For example, extreme weather events can halt mining operations, while water scarcity can limit processing capabilities. These disruptions can have cascading effects throughout the supply chain, impacting everything from raw material availability to pricing and delivery timelines. As demand for critical minerals grows, particularly for renewable energy technologies, the resilience of these supply chains becomes increasingly vital.

 

➡️ How does Marsh help companies in analysing and mitigating climate risks?

Marsh’s global climate and sustainability advisory team provide comprehensive climate risk services and support clients in assessing and quantifying how climate risks are likely to impact their businesses. Our analysis typically uses climate modelling to develop risk profiles for individual assets and/or across client portfolios, looking across future timelines and climate change scenarios. Once climate risks have been quantified, our team work with clients to detail the likely impact of these risks with respect to physical damage, disruption and associated financial losses. Marsh utilises its deep understanding of climate risk and resilience to deliver these services and works with our property risk and engineering risk colleagues to deliver practical recommendations.

 

➡️ What steps should companies take to build climate resilience? And how can they prepare for long-term climate uncertainties?

Improving resilience to long-term climate risks/uncertainties can be structured under three headings: 1) protecting assets from the physical impacts of climate change using protective measures and/or augmenting operational procedures to mitigate risk; 2)  improving resilience of assets and operations via a suite of physical and non-physical measures. This can include adapting assets to ensure that the impacts from climate-related events are minimised and disruption to operations are controlled – and looking at critical assets, infrastructure and supply chains to identify sensitivities and mitigate climate impacts by substitution and/or diversification; 3) emergency planning can demonstrate a level of climate preparedness and a management-level commitment to improving climate resilience.

 

➡️ How can companies integrate climate resilience into their business strategy? How can they ensure their business resilience does not come at the cost of societal climate resilience?

Companies should seek to ‘layer’ climate resilience into their business via a gradual and consistent program of adaptation. This can include physical measures as described, but can also inform strategies on asset development, maintenance, refurbishment, etc. Growth plans should also consider the possible impacts from climate risks and decision-making on business location, product transportation, clients and supply chain. Integrating these elements into decision-making will allow a business to improve its resilience and consistently demonstrate its level of climate preparedness.

 

➡️ What do you think are the main roadblocks mining companies face in implementing effective climate risk strategies?

Mining companies often face several roadblocks in implementing effective climate risk strategies, including limited access to data and financial constraints. Additionally, there may be resistance to change within organisational cultures, as well as challenges in aligning short-term business objectives with long-term sustainability goals. Overcoming these barriers often requires strong leadership, support from climate risk experts, and a commitment to fostering a culture of resilience.

 

➡️ What role - if any - do regulations play in climate risk management in the mining industry?

Regulations play a critical role in climate risk management within the mining industry by establishing standards and frameworks that guide companies in their environmental practices. Regulatory requirements can drive companies to adopt more sustainable practices, enhance transparency, and invest in climate resilience measures. Companies must stay informed about evolving regulatory landscapes to ensure compliance and mitigate risks effectively.