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Asia’s critical minerals boom is exposing investors to mounting environmental, human rights and climate risks.
Most nickel, cobalt and copper miners have strong policies on labour, modern slavery and emissions.
But implementation lags badly, especially on due diligence, mine closure and climate planning.
Critical minerals that underpin the global clean energy transition are increasingly exposing investors to environmental, social and climate risks, with mining companies across Asia showing a persistent gap between sustainability commitments and on-the-ground implementation, according to a new report by the Asia Investor Group on Climate Change (AIGCC) and ISS STOXX Research Institute.
The report, Stewardship in the Critical Minerals Value Chain: Assessing Sustainability Performance and Risks in Asia, finds that while most mining firms have adopted policies on human rights, labour standards and environmental protection, many struggle to translate those commitments into effective operational practices.
"Policy adoption is widespread, but implementation is uneven. This divergence between commitment and practice is a clear area for investor engagement," the report states.
The study assessed 14 mining operators across Asia involved in the production of nickel, cobalt and copper, three minerals considered critical for electric vehicles, renewable energy infrastructure, advanced electronics and energy storage technologies.
According to the United Nations Environment Programme, demand for critical minerals could increase sixfold by 2050, pushing their market value to about $400 billion.
The assessment, aligned with the Initiative for Responsible Mining Assurance (IRMA) standards, found that nine of the 14 mining operators had formal human rights policies, but only seven demonstrated strong human rights due diligence practices.
Five companies were classified as laggards in due diligence processes, exposing investors to potential operational disruptions and reputational risks.
The report also identified significant modern slavery concerns. While nine operators were categorised as leaders or outperformers in managing modern slavery risks, three were classified as laggards.
Supply chain vulnerabilities remain particularly acute. Seven of the 14 operators were categorised as high risk for supply chain-related modern slavery concerns, while all 14 companies were assessed as operating in locations with elevated modern slavery risks.
The analysis found a stark disconnect between labour policies and implementation. Thirteen companies were classified as leaders for policies addressing forced and child labour, but only six were leaders in implementing measures to prevent such practices. Seven companies were categorised as laggards on implementation.
Community engagement emerged as one of the stronger areas of performance, with 10 of the 14 companies classified as leaders in community outreach and consultation. However, mine closure, decommissioning and land reclamation remain major weaknesses. Only two companies were identified as leaders in planning for mine closure and rehabilitation, while the remaining 12 were classified as advancers or laggards.
The report warns that inadequate long-term environmental planning can expose companies and investors to future liabilities, regulatory penalties and stranded assets.
Environmental performance across the sector showed mixed results. Ten companies were classified as leaders in reducing greenhouse gas emission intensity. However, strategic climate planning remained weak. Seven companies were classified as laggards for setting greenhouse gas reduction targets and action plans, while another seven lagged in disclosing climate risks and mitigation strategies.
The report notes that mining firms generally understand where water stress threatens their operations, but many have yet to develop comprehensive responses to climate-related risks.
The study's biodiversity assessment found that mining companies are heavily dependent on ecosystem services, particularly water resources. Mining operators derive 63 per cent of their ecosystem service-related revenue dependency from regulation and maintenance services, including water flow regulation and climate regulation. Another 35 per cent comes from provisioning services such as freshwater resources.
Among ecosystem services, surface water flow maintenance, groundwater and surface water were identified as the most financially material dependencies.
The report warns that degradation of these ecosystem services could increase operational costs, trigger regulatory action and heighten conflicts with local communities, leading to project delays and operational disruptions.
Mining operations were also found to contribute significantly to nature loss. Land use change accounted for 57.1 per cent of biodiversity impacts from the assessed companies, followed by pollution at 32.4 per cent and climate change at 10.5 per cent.
Using climate projections under a high emissions scenario that assumes approximately 4.3°C warming by 2100, the report assessed 297 mining assets across Asia. The analysis found that water stress risks will rise substantially over the coming decades. Between 2026 and 2040, 77 mining assets are expected to face high water stress risk. Between 2026 and 2055, that number is projected to climb to 140 assets. Meanwhile, assets classified as low risk are projected to decline from 66 to 17.
Heatwave exposure is also expected to worsen significantly. The number of mining assets facing high heatwave risk is projected to increase from 66 during 2026 to 2040 to 152 during 2026 to 2055, an increase of more than 130 per cent.
According to the report, rising water scarcity and extreme heat could disrupt production, increase operational costs, reduce labour productivity and intensify competition for resources with local communities.
The report highlights Indonesia's growing influence in the global nickel market. The country holds more than 22 per cent of global nickel reserves and accounted for 60 per cent of global nickel production in 2024.
Indonesia has pursued a resource nationalism strategy, including a ban on nickel ore exports since 2020 and policies encouraging domestic processing. The country has also set a target of reducing carbon emissions from its nickel sector by 81 per cent by 2045.
However, the report cautions that weak enforcement and oversight have contributed to environmental degradation, human rights concerns and social tensions despite a strong regulatory framework.
China remains the world's largest nickel consumer, accounting for more than 63 per cent of global demand in 2024. Chinese firms control around 75 per cent of Indonesia's nickel refining capacity and absorb more than 85 per cent of the country's ferronickel exports.
The report identifies investor engagement as a critical tool for managing risks linked to pollution, Indigenous rights, labour standards, community consultation and climate governance.
A review of 69 mining-related investor engagement cases between 2020 and 2025 found that half involved environmental violations and more than one-third involved human rights violations. Pollution and Indigenous rights were the most common issues.
The report recommends that investors strengthen due diligence on mining exposures, prioritise engagement where implementation gaps are greatest, direct capital towards sustainability leaders and integrate climate and nature risk analytics into investment decision-making.
"Investors who engage proactively, particularly on human rights and environmental management, can play a meaningful role in shaping more responsible practices while reducing their portfolios' risk exposure," the report concludes.