Investors Seek Certainty on Deep-sea Mining
ISA negotiations rumble on in the background, while shareholder dissent and DSM legal challenges are on the rise.
Despite ongoing regulatory uncertainty, a growing number of investors and NGOs are drawing a line in the sand and challenging companies and governments on deep-sea mining (DSM).
While those in favour of DSM have claimed it is necessary to ensure there are enough critical minerals available to power the energy transition, opponents cite concerns about the long-lasting environmental ramifications of polluting and destroying ocean ecosystems.
As such, US shareholder advocacy firm As You Sow (AYS) filed the first DSM-focused resolution at General Motors (GM) this year, calling for the car manufacturer to commit to a DSM moratorium. GM’s annual general meeting (AGM) took place earlier this month, receiving 12% of the vote, thus passing the required threshold to be refiled next year.
Elizabeth Levy, Biodiversity Programme Coordinator at AYS, told ESG Investor that the company had been “very ambiguous” on DSM.
“When you compare GM to its peers, it is clearly a laggard on the issue,” she said. “Having such a large player not committing to a DSM moratorium is really dangerous, as it sends a message to investors and consumers that the door is open for deep-sea minerals.”
Other car manufacturers, such as Toyota and Tesla, are also yet to take a public stance on DSM.
“This leaves shareholders concerned that the companies are not addressing the serious reputational and regulatory risks of DSM,” said Emine Isciel, Head of Climate and Environment at Storebrand Asset Management. Isciel confirmed that the asset manager has engaged with both companies to encourage them to commit to a DSM moratorium.
AYS also filed a DSM resolution at Tesla, which will be voted on at the company’s AGM on 13 June.
“What we do know for sure is that the global economy is dependent on nature and the services it provides, and that ecosystems such as the ocean play an important role for climate change,” said Isciel. “The ocean is worth more than just the value of its finite resources.”
Thorny issue
There has also been a steady increase in ocean-focused litigation.
In January, the Norwegian government voted in favour of commercial-scale DSM in national waters to facilitate the country’s net zero transition and bolster domestic energy security.
Last month, the World Wide Fund for Nature (WWF)-Norway announced it would be taking legal action against the government, alleging that its decision to open areas to DSM was illegal as the strategic impact assessment that did not fulfil minimum scientific assessment requirements.
“This [litigation] is highly relevant for countries that may be keeping an eye on Norway as a potential future source of minerals from the seabed,” said Bobbi-Jo Dobush, Legal Officer and DSM Focal Point at The Ocean Foundation. “This lawsuit, and widespread opposition in Norway, Europe and globally, is very likely to delay – if not derail – any mineral production, or to increase the cost of defending such business to the point of making it less attractive.”
Storebrand’s Isciel told ESG Investor that the asset manager had also engaged with the Norwegian government on this issue.
“[We have] underlined the financial risks related to DSM,” she said. “We will be closely monitoring this case, as it can result in a real shift in government policy.”
Research published by financial think tank Planet Tracker earlier this year highlighted that DSM was financially inviable, warning it could result in over US$500 billion in value destruction.
Wider scope
But ocean-focused legal action has not been restricted to DSM only. Non-profit BLOOM and environmental law firm ClientEarth recently challenged the French government over its allowance of “highly destructive” fishing methods – such as bottom trawling in protected marine areas in the Mediterranean – despite an EU-wide ban. France will be hosting the third UN Conference on the Oceans in June next year.
This wave of litigation also follows countries’ growing recognition of the important role that oceans – as the largest natural carbon sinks – can play in the realisation of environmental and climate goals. They have been mentioned in recent core international commitments, such as the Global Biodiversity Framework and the Sharm el-Sheikh Implementation Plan.
As it stands, there are over 30 outstanding regulatory matters in relation to DSM.
“When [critical minerals are] sourced on land, risks are known: there is a legal framework in most cases, and a history of issues that allows investors in mining companies, their clients, or companies further up the supply chain to assess these risks,” said François Mosnier, Head of the Oceans Programme at Planet Tracker. “None of this exists [yet] for DSM, so investors must protect themselves from these new, high risks.”
On a more positive note, in May, the International Tribunal for the Law of the Sea (ITLOS) rendered its first advisory opinion on the obligation of states to protect and preserve the marine environment.
“There appears to be a clear trend emerging towards seeking these advisory opinions to develop a robust marine protection framework through ITLOS jurisprudence,” said Anna von Rebay, Founder of Ocean Vision Legal, a law firm specialising in marine protection.
A recent legal opinion published by Matrix Chambers also argued that a DSM moratorium was possible, and even required under the UN Convention on the Law of the Sea.
Borrowed time
Meanwhile, the International Seabed Authority (ISA) – which is responsible for governing and regulating activities involving seabeds, ocean floors and subsoils outside of national jurisdictions – is still debating rules that would allow DSM activities in international waters.
The ISA’s negotiations on DSM began last year, following an earlier request for the authority to finalise rules and regulations on mining activities. This triggered a two-year countdown that expired in July 2023, technically allowing companies and countries to submit applications for exploitation licences since.
The authority is now targeting next year to finalise the mining code.
Ahead of the 29th Session of the ISA Council and Assembly next month, the Deep Sea Conservation Coalition has urged attendees to support a general policy for the protection and preservation of the marine environment, decrease the “untenable pace” of negotiations on the mining code, and reject plans for exploitation under the two-year loophole.
“While it is important to make a distinction between what is happening in areas within national jurisdiction (like the WWF-Norway versus the Norwegian government litigation) and what is happening beyond national jurisdiction (where the ISA is currently negotiating exploitation regulations), similar conversations are being had [in both spaces],” said Samantha Robb, Senior Associate at Ocean Vision Legal. “There are too many knowledge gaps to meet the legal minimum standard for environmental impact assessments.”
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