Is There an ESG Case for Deep-sea Mining?
Independent deep-sea mining expert Bobbi-Jo Dobush runs through the E, S and G-related risks posed by the nascent industry.
Deep-sea mining (DSM) is a speculative commercial industry with ambitions to extract mineral deposits from the ocean floor. The primary targets are four key minerals: manganese, copper, cobalt, and nickel. Aside from scientific exploration, DSM is theoretical, but proponents are aggressively seeking capital.
A vocal subset of DSM supporters touts it as a more environmentally friendly and socially responsible alternative to traditional land-based mining, framing it as an ESG-related investment.
However, DSM is an unproven and high-risk industrial endeavor, beset by significant technical, financial, and regulatory uncertainties. It’s fraught with Indigenous opposition and human rights concerns, and public approval has been low. It also carries substantial potential financial and legal liabilities for investors.
Environmental concerns
Scientists confirm that DSM will have devastatingly wide impacts on microorganisms, fisheries, food chains, cultural traditions and more by impacting the seafloor and water column.
A 2023 study analysed more than 100,000 records of animals in the Clarion-Clipperton Zone (CCZ), finding that over 90% of identified species were unknown to science. Sediment clouds created by DSM operations could travel hundreds or even thousands of kilometres, potentially disrupting the entire mid-water food web and commercially affecting important species such as tuna.
Additionally, noise pollution from DSM could interfere with marine animals, including whales, which are significant to the tourism industry. Deep-sea corals and marine genetic resources are also at risk – the mineral substrates themselves provide critical habitat for unique deep-ocean species.
Despite claims by industry, there is no consensus that DSM would be less harmful or have a lower impact, including to biodiversity or to the climate, than terrestrial mining. There is also little indication that DSM would replace terrestrial mining and there is much evidence that it would not.
A study commissioned by the International Seabed Authority (ISA), the regulatory body in charge of DSM in international waters, found that mining both the deep-sea and on land could drive down mineral prices. Seabed minerals would also not meaningfully augment global supply. Instead, DSM would increase the percentage of the Earth subject to harmful extractive industries.
Social concerns
The risk of DSM infringing on human rights is significant.
Potential impacts include pollution affecting human health and livelihoods and the failure to respect Indigenous rights. The ISA has faced criticism for its lack of public participation and a failure to address the need for Free, Prior, and Informed Consent (FPIC) from affected communities. Indigenous groups globally oppose DSM, emphasising the need to protect their cultural heritage and ocean ties.
By treaty, the ISA is tasked with ensuring the equitable distribution of benefits from DSM, especially to developing countries. However, a recent study suggests that DSM will not significantly benefit any nation’s economy. DSM raises human rights concerns, including intergenerational equity and the rights of children.
The UN High Commissioner for Human Rights has urged caution, emphasising that “all life on earth is dependent upon healthy ocean ecosystems.”
Governance concerns
Regulations for DSM exploitation in international waters are incomplete, and major unresolved issues remain. A 2024 peer reviewed paper found that 30 major issues in the ISA regulations remain outstanding and that the ISA internal 2025 target date for completion is unrealistic.
The ISA Secretariat has also come under scrutiny for a host of internal practices – from bullying to excessive spending. Outgoing ISA Secretary General Michael Lodge reportedly gave confidential information directly to front-running DSM proponent The Metals Company (TMC).
In July, Brazilian oceanographer and diplomat Leticia Carvalho won the election for Secretary General with 79 of 113 votes cast. Many believe this election signals the beginning of change, as Carvahlo has clearly stated that she prioritises transparency and accountability. Her term begins in January 2025.
The business history of leading DSM companies also raises concerns. For example, a major DSM player in the South Pacific is reportedly funded by entities with ties to a sanctioned oligarch and a company involved in the 1MDB scandal.
In North America, TMC has acquired interests in a company with significant investments in natural gas, further complicating the ESG narrative.
The shaky business case for DSM
A 2024 report assessing the economic viability of DSM highlights its unrealistic financial models, technological challenges, and poor market prospects. DSM has never been implemented at scale, and operational challenges in the deep-sea – including extreme pressure, freezing temperatures, corrosive seawater, and limited light – jeopardise the efficiency of equipment. High operational, processing, and establishment costs pose a grave threat to profits.
The DSM industry has stated seabed minerals could provide critical raw materials for the green energy transition, particularly for electric vehicles (EVs). However, innovations in battery technology are reducing reliance on seabed minerals. The growth of lithium iron phosphate (LFP) batteries, which do not require minerals targeted by DSM, has been rapid, capturing a significant portion of the global EV battery market. Additionally, investment in the circular economy is directing focus to recycling and reuse of existing materials.
A complaint filed on 18 July with the US Securities and Exchange Commission alleges that TMC has failed to inform investors that the EV battery shift is occurring now and is not a speculative risk. In response to innovation, the DSM industry has begun to espouse broader, non-ESG applications for seabed minerals, including defence and infrastructure. However, the economics of DSM do not line up, and the financial and liability risks to investors remain, even for these non-sustainable applications.
The DSM regulatory environment is fraught with uncertainties, including unresolved royalty structures and overlapping jurisdictions. Potential contradictions between the ISA, flag states, sponsoring states, and adjacent coastal nations could lead to conflict, litigation, or required compliance with multiple regulatory regimes.
DSM excluded from ESG portfolios
Many investors and financial institutions have excluded DSM from their definitions of sustainable investment.
Major banks such as Lloyds, NatWest, Standard Chartered, ABN Amro, Credit Suisse, and BBVA have pledged not to finance DSM projects. In July, major insurers Hannover Re, Zurich Insurance Group, Vienna Insurance Group, joined Swiss Re in excluding DSM from their underwriting portfolios.
The European Investment Bank has also classified DSM projects as unacceptable due to climate and environmental concerns. The Taskforce on Nature-related Financial Disclosures (TNFD) recommends avoiding DSM activities, noting both the risk of irreversible environmental damage and the transition risk of reduced capital availability.
The UN Environment Programme Finance Initiative (UNEP FI) concluded that financing DSM is inconsistent with principles of sustainable finance due to its significant reputational, regulatory, and operational risks. The International Capital Market Association (ICMA) issued guidance on sustainable blue economy bonds, explicitly excluding DSM. Similarly, the UN Conference on Trade and Development (UNCTAD) has excluded DSM from its sustainable ocean economy classification due to its high environmental risk.
A Marine Minerals ESG Handbook, funded by DSM proponents, was released this week. In an appendix on relevant guidelines and reporting standards, the handbook does not list the UNEP FI report, the ICMA guidance, or the UNCTAD classification. The TNFD is listed, but the fact that the TNFD recommends avoiding DSM is not mentioned.
The handbook refers to but does not define discrete “sensitive areas”, while the TNFD states that organisations looking at DSM “should consider all seabed sites as sensitive.”
State of play
Opposition to DSM is growing. Major corporations, including Google, Samsung, Volvo, BMW, and Salesforce have committed to avoiding DSM-sourced minerals. Since June 2022, 32 countries have called for a moratorium on DSM. Meanwhile, the industry continues to lobby governments, but the potential impacts on ocean ecosystems and human rights cannot be ignored. The US has taken a precautionary approach to DSM, emphasising the need for improved science, tribal consultation, and engagement with Indigenous and impacted local communities.
The July ISA meetings saw the completion of the first reading of the draft mining regulations, but many substantive provisions were left undecided and far from agreement. A review of the ISA itself, as mandated by treaty, is on the horizon in 2025, as is a conversation on general policy for the protection of the marine environment.
Scientists believe it will take decades to obtain the baseline information necessary to make decisions about the environmental impacts of DSM, regardless of whether regulations exist. A recent science policy brief makes clear that the draft regulations fail to mandate collecting such information – a major outstanding regulatory gap.
DSM carries the risk of irreparable damage to ocean ecosystems and violations of human rights and Indigenous Peoples’ rights, exposing investors to significant liabilities and reputational risks.
These include: 1) compliance with complex regulatory regimes at various levels; 2) potential financial liabilities for environmental damage under international regimes and emerging treaties; and 3) direct demands for compensation from affected third parties, such as fisheries, eco-tourism industries, and coastal nations.
As such, investors should critically evaluate all claims about the necessity and sustainability of extracting non-renewable resources from the ocean’s most pristine environments, particularly in the absence of regulation, insurance, public approval, and scientific support.
This article was co-authored by Madeline Warner, a data-driven expert on sustainability and climate policy.
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