Quarterly Outlook
Q3 Investor Outlook: Beyond American shores – why diversification is your strongest ally
Jacob Falkencrone
Global Head of Investment Strategy
Saxo Group
Electric vehicles, solar panels, and battery storage depend on a select group of metals such as lithium, cobalt, nickel, and copper. These materials -called green metals, or green transition metals- are central to the energy transition, but their supply chains face complex challenges.
Global production is heavily concentrated, raising concerns about access, price volatility, and geopolitical exposure. Meanwhile, traditional mining practices are under scrutiny for environmental damage and poor labour standards. As demand accelerates, these pressures are reshaping how these critical minerals are sourced, regulated, and financed.
Green metals refer to minerals integral to technologies that reduce greenhouse gas emissions. Key examples include lithium, cobalt, nickel, and copper, which are essential for batteries, electric vehicles (EVs), wind turbines, and solar power systems. Without these materials, most clean energy infrastructure would not function.
These metals are critical, not only for their technical properties, such as their high conductivity, thermal resistance, and energy density, but also for their role in decarbonising major sectors of the economy, including transportation, energy generation, and heavy industry. They enable electrification, energy storage, and grid expansion at the scale needed to transition away from fossil fuels.
However, the supply of green metals is geographically concentrated, posing risks to global supply chains:
This concentration raises concerns about supply security, price volatility, and geopolitical risks, underscoring the importance of diversifying sources and investing in sustainable mining practices.
Electric vehicle (EV) batteries are central to modern clean transportation systems, making their supply chains a strategic priority for governments and industries worldwide. At the core of this chain lies a small group of materials—particularly lithium, nickel, and cobalt—that determine battery performance, durability, and cost.
The demand for lithium has surged in recent years, driven by exponential growth in EV production and the broader need for lithium-ion batteries in consumer electronics and grid storage. According to the International Energy Agency, lithium demand tripled between 2017 and 2022 and continues to rise. Projections suggest lithium requirements could grow almost seven times by 2035, depending on battery chemistry trends and policy momentum.
Global EV battery supply chains remain highly centralised, creating exposure to external risks. China, for example, processes over 60% of the world's lithium and controls much of the global cathode and anode market. This dependence on other countries for raw materials and refining has become a serious vulnerability, especially in light of trade tensions and export controls.
As a result, diversification strategies are gaining traction. The United States, European Union, and Japan are pushing for greater domestic capacity, investing in upstream mining, midstream refining, and downstream cell production. These efforts reflect a growing recognition that control over the EV battery supply chain is not only a matter of industrial policy but also of energy and national security.
The environmental impact of mining has come under increased scrutiny as demand for green metals rises. While these materials are essential for low-carbon technologies, their extraction and processing carry significant ecological costs, particularly when conducted using conventional methods.
Mining for lithium, cobalt, and other transition metals often involves open-pit operations, chemical leaching, and water-intensive processes. These activities can result in land degradation, biodiversity loss, and contamination of water sources with heavy metals. For instance, in parts of Latin America, lithium extraction from brine deposits has raised concerns about freshwater depletion in arid regions. Also, in parts of Africa and Southeast Asia, poor waste management and unsafe tailings disposal have led to toxic runoff and long-term soil contamination.
Efforts to reduce the environmental impact of mining are growing, but progress remains uneven. Some companies are trialing innovations such as water recycling systems, dry tailings storage, and site rehabilitation. At the same time, external pressure is intensifying. Regulators, investors, and local communities are demanding higher standards for sustainability and accountability. In response, many countries have introduced stricter rules for environmental assessments, permitting, and post-mining restoration, signaling a shift toward more rigorous oversight across the sector.
These developments indicate a shift in how sustainability is measured in resource extraction. It is no longer just a technical question of output but a broader evaluation of a mine's impact on ecosystems, water usage, and community wellbeing.
Mining companies are under increasing pressure to decarbonise, not just for compliance or sustainability, but to remain investable under evolving ESG mandates and global regulatory standards. Reducing emissions is now a crucial factor in valuation, access to capital, and long-term competitiveness.
In response, many miners are adopting technologies and methods aimed at lowering emissions across the value chain:
Advanced technologies such as artificial intelligence, geospatial mapping, and sensor-based remote sensing are improving the precision of mineral exploration. By reducing unnecessary drilling and shortening development timelines, these tools help cut emissions linked to land use, transport, and site preparation.
Traditional refining relies heavily on fossil fuels. Some operators are shifting to electric arc furnaces powered by renewables and adopting hydrometallurgical processes that require less heat and reduce carbon intensity, particularly in aluminium and nickel refining.
Diesel-powered trucks and loaders are significant contributors to mine-site emissions. Battery-electric vehicles, hybrid machinery, and autonomous haulage systems are now being piloted or deployed at scale to reduce fuel consumption and improve operational efficiency, especially in remote or underground sites.
Wind, solar, and hydropower are being integrated into the energy mix at select mine sites. In regions with strong renewable potential or supportive infrastructure, these sources can meet a significant share of operational demand, reducing dependence on carbon-intensive grids or diesel generators.
Beyond on-site operations, leading mining firms are tackling Scope 3 emissions, which are those linked to suppliers, logistics, and customers. Supply chain electrification, green procurement standards, and low-carbon product certifications are gaining momentum as part of investors' due diligence.
Frameworks such as the TCFD and new ISSB-aligned climate disclosure standards are accelerating transparency and comparability in emissions data. These are becoming prerequisites for capital access from ESG-aligned funds and sovereign wealth investors.
As global demand rises, market participants are exploring various ways to gain exposure to green metals. Here are the main ones:
Exposure to green metals can be accessed through listed companies involved in mining, refining, or processing. These firms range from regionally focused developers to globally diversified operators active across multiple parts of the value chain.
Energy transition-focused ETFs and mutual funds provide bundled exposure to companies linked to critical minerals and related technologies. These products offer a diversified entry point to the theme without requiring detailed company-level analysis.
Institutional and long-duration investors are increasingly active in private markets, backing innovation in areas such as battery recycling, low-impact extraction, and supply chain digitisation. These opportunities often feature longer time horizons and a higher degree of operational or regulatory complexity.
Some corporates and public-sector entities are entering into long-term supply contracts, joint ventures, or co-investments with raw material providers. These arrangements often shape project development and influence market dynamics, particularly in constrained supply environments.
Financial instruments such as futures, options, and structured notes linked to metal prices or indices offer another route to engage with market movements. These tools are generally suited to experienced investors with experience in commodity-linked risk management.
Fixed-income instruments linked to mining or processing projects with environmental performance criteria are also emerging. These include green bonds, infrastructure debt, and sustainability-linked loans, offering a different risk-return profile aligned with long-term capital deployment.
Factors to consider before you invest
How someone approaches green metal investments depends on a few key factors:
Some focus on the mining side, where the most significant challenges are supply bottlenecks, regulation, and geopolitical exposure. Others are more drawn to companies developing new ways to process materials or building technologies that use them, such as batteries, motors, and renewable energy systems. Decisions also depend on how comfortable someone is with price swings, policy shifts, and fast-moving changes in areas like battery design or recycling.
Clean energy systems rely on a few critical metals, and demand for them is rising fast. However, supply remains uneven, and the pressure on producers, governments, and buyers is increasing. Also, scrutiny now extends beyond extraction to processing, logistics, and how long these materials stay in use.
This shift is already changing where capital goes and how projects are evaluated. The way green metals are sourced and managed will shape how the transition unfolds, and who's positioned to benefit from it.