Industry

Deep-sea Mining Deemed Financially Unviable

The fledgling industry could lead to an estimated half-trillion dollars in losses, with investors being urged to protect Earth’s “last frontier”. 

Claims that investment in deep-sea mining (DSM) will unlock strong returns for investors have been described as a “false narrative” by non-profit financial think tank Planet Tracker.

As human attention increasingly turns to the Earth’s “last frontier” – the deep sea – in a new report entitled ‘How to Lose Half a Trillion’, the group explored the financial performance that the DSM sector could produce if it was supported properly. 

“Our previous research has highlighted that the environmental damages of DSM would be colossal, but there are investors out there who don’t care about those considerations,” François Mosnier, report author and Head of the Oceans Programme at Planet Tracker, told ESG Investor. “The ongoing argument that there’s a trade-off to be made between the negative environmental impacts of DSM and expected financial returns has been found out as a false narrative.” 

According to Planet Tracker, DSM activities and commitments could result in over US$500 billion in value destruction. Between US$30 – US$132 billion of that value would come from the mining sector – up to 13 times the combined GDP of all Pacific Island small states. 

“This is due to negative returns on invested capital for the mining of deep-sea nodules […] and an increase in the cost of capital for large, high-cost terrestrial mines of nickel, cobalt and copper – the most at risk from disruption from deep-sea miners,” the report read. 

A separate new report published by environmental charity The Ocean Foundation noted high uncertainty around metal prices, adding that the transition to a more circular economy would likely render DSM unnecessary. 

“If companies in the DSM industry can’t be profitable, then the financial benefits for countries – especially low-income ones – that choose to support and facilitate DSM will also be marginal at best,” Mosnier said. “It’s unlikely there will be a lot of wealth to distribute.” 

Bigger picture 

Planet Tracker’s findings pointed to a broader issue with the way the finance sector prices natural resources, calling for a “paradigm shift” in terms of how investors engage with nature. 

According to the report, investing in nature preservation over the last three decades would have yielded financial returns three times higher than investments that have been made in exploitation. Protecting deep-sea abyssal plains would also be worth at the least ten times more than exploiting them, the report mentioned. 

“Investing in the transition of the mining sector more broadly – the decarbonisation of nickel supply chains for example – is far more profitable for investors in the long-term compared to betting on DSM,” said Mosnier. 

Some investors have voiced strong opposition to DSM. For instance, 37 financial institutions collectively managing €3.3 trillion (US$3.6 trillion) in assets co-signed a statement last year, calling on governments not to proceed with DSM activities until the full scope of their environmental, social and economic risks was understood. 

Additionally, several investors have filed shareholder resolutions ahead of the 2024 proxy season, calling on investee companies to avoid engaging in DSM directly, or through their supply chains. 

A number of global companies have already signed a public statement calling for a moratorium on DSM, in which they committed not to source minerals from the deep seabed or financing these activities. 

Meanwhile, the UN Environment Programme Finance Initiative has officially stated that the financing of DSM is not aligned with its Sustainable Blue Economy Financial Principles. 

Lines in the sand 

Despite obvious environmental and financial concerns, governments and international bodies continue to debate the validity of DSM in both national and international waters. 

In January, Norway became the first country to green-light commercial-scale DSM in national waters, with plans to open up 280,000 square kilometres for companies to mine. The government first proposed this last year, citing the need for critical minerals to facilitate the country’s energy transition. However, the proposal violated Norway’s Seabed Minerals Act. 

Although Norway has claimed it would only begin issuing licences once further environmental studies have been carried out, its decision has created tension with some trading partners. In November 2023, 120 EU lawmakers sent an open letter calling on the Norwegian parliament to reject the DSM bill.

Other countries, including Brazil, Finland and Portugal, have called for a moratorium on DSM. Japan, for its part, conducted DSM testing in 2020, but negative impacts for local marine life were identified in subsequent research. 

On the global stage, the International Seabed Authority (ISA) – the body responsible for governing and regulating activities involving seabeds, ocean floors and subsoils outside of national jurisdictions – engaged in negotiations to determine whether and how countries should mine the deep-sea in international waters. The rules are due to be finalised by 2025.The ISA will reengage in talks on DSM with Jamaica this month. 

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