Decarbonization of materials and investor expectations
Within the materials industry, the metals & mining industry is the most emission intensive sector. The IMF expects metal demand to surge in a net-zero emissions scenario, rising more than four-fold for the period 2021-2040. As metal demand increases, so must supply. Given the current greenhouse gas footprint of metals & mining, the sector faces vast challenges in decarbonizing production processes, transport and its products. Fortunately, many companies in our portfolio are taking climate change and the energy transition seriously. For mining & metal companies, switching from fossil fuels to renewable energy for energy consumption, electrifying transport and creating and producing low-carbon metal products will be key in achieving climate-related objectives. For other emission-intensive industries, such as the chemicals industry, the electrification of production processes, in combination with an increase reliance on renewable energy will be key in decarbonization this decade. For the following decades, scaling up of hydrogen-related energy solutions will be critical for the industry to achieve net zero.
PGGM sets certain expectations related to climate change and decarbonization while engaging with materials industry companies:
- We want all materials companies to publicly commit to decarbonization in line with the objectives from the 2015 Paris Agreement for all material scope 1, 2 and 3 greenhouse gas emissions.
- The companies need to publicly disclose interim emission reduction targets and track their progress towards set targets.
- Companies are required to develop and implement realistic yet challenging climate transition plans, outlining their corporate strategy for reducing scope 1, 2 and 3 emissions, including plans for increased use of renewable energy, electrification of production processes and transports, transitioning to low-carbon products and frontier technologies such as the use of hydrogen and carbon capture and storage.
- Companies are expected to align their operational and capital expenditures with climate strategies and further incorporate sustainability in their corporate governance structures.
Decarbonization in metals & mining in practice: Boliden AB
Boliden AB is a mining company based in Sweden, with operations stretching the Scandinavian Peninsula. Boliden produces kilotons of zinc, copper, lead and nickel yearly, in addition to relatively small amounts of gold, silver and tellurium. As highlighted above, metals such as copper and nickel, but also tellurium, are critical for the manufacturing of low-carbon products, the decarbonization of many industries and sectors and thus a successful energy transition.
Boliden has committed to reduce the emission intensity of production by 40% in 2030 and achieve net-zero emissions in 2050, for all scope 1 and 2 emissions. As a member of the International Council on Mining and Metals (ICMM), Boliden is expected to also set scope 3 emission reduction targets by the end of 2023 to align its value chain with the objectives from the Paris Agreement as well.
In their mines, most emissions stem from the consumption of diesel from their mining trucks. In order to achieve their 2030 emission reduction target, Boliden will have to switch to either biofuels or electrify transports. At their Kevista mine, Boliden is experimenting with trucks on electric trolley cables powering the truck using electricity, as opposed to diesel-fueled trucks. Boliden also purchased its first Battery Electric Vehicle (BEV) truck, co-developed together with Scania. This collaboration will help Boliden electrifying more of its transports.
To reduce scope 3 emissions and to diversity the range of products offered to customers, Boliden has developed and is producing low-carbon copper, as well as recycled copper, in its mines in the North of Sweden, using clean energy. This low-carbon copper has one of the lowest carbon footprints of any refined coppers in the world, as claimed by Boliden.