3rd Mining 2030 Investor Roundtable: Deep-Sea Mining
On 10th June, the Mining 2030 Investor Agenda – the investor coalition focused on engagement with the global mining sector and led by the Church of England Pensions Board – hosted its third roundtable, this time focusing on deep-sea mining (DSM).
DSM is the practice of extracting minerals from depths of more than 200m and is seen by some as a strategic path to secure critical minerals for the low-carbon transition. Given the human impact, environmental damage and waste associated with terrestrial mining, supporters of DSM say the process is a lower impact means of acquiring minerals such as rare earth elements, cobalt and lithium.
However, the nascent DSM sector faces a number of environmental, legal and financial uncertainties, as roundtable attendees heard from expert speakers Pippa Howard, Director, Corporate Sustainability at Fauna & Flora International, Dennis Fritsch, Senior Project Coordinator – Sustainable Blue Finance at UNEP FI, and Hannah Lily, independent legal consultant specialising in DSM.
Key takeaways from the roundtable include:
The deep sea is a pristine, richly biodiverse and largely unexplored environment, and performs critical ecosystem services in complex interconnectivity with ocean and terrestrial ecosystems. For example, the deep sea is the world’s largest carbon sink, by way of the “ocean pump” cycle of physical and biochemical processes, and an indispensable part of the global food chain. The deep sea is known to host at least 230,000 species of marine plants and animals, with many more likely to exist.
Opponents of DSM therefore raise concerns of the risks of causing changes in ocean systems which may have potentially global and irreversible repercussions, including destroying carbon storage, disrupting climate regulation processes, wiping out potentially undiscovered species and ecosystems, and disturbing global food chains, investors heard from FFI’s Pippa Howard.
There are three key resource types targeted by the emergent DSM industry, with mining of each carrying its own distinct mineral resource profile as well as environmental risk implications.
- Polymetallic nodules are rock formations containing minerals such as cobalt, lithium, copper and REEs, located in the richly biodiverse Abyssal Plains. The nodules themselves are host to microbial communities, and mining would mean removing entire substrates and their associated ecosystems, with the removal of trace metals from the seawater at risk of destabilising ocean chemistry and carbon cycles.
- Cobalt-rich ferromanganese crusts contain minerals such as cobalt, manganese and nickel. They are located on deep seamounts, which are host to diverse communities of marine life, shape ocean currents and direct deep nutrient rich waters to surface waters. The mounts play a fundamental role in supporting pelagic fisheries.
- Polymetallic sulphide deposits contain minerals such as copper, cobalt, manganese and zine, and are created by hydrothermal vents. As well as providing an extremely rare habitat hosting a range of specialist organisms, these vents represent important carbon and methane sequestration capacity.
Source: Miller et al (2018), Frontiers in Marine Science
Though DSM deposits are distributed across the planet, most activity is seen in the Western Pacific, the Clarion Clipperton Fracture Zone, the Mid-Atlantic and the Indian Ocean. DSM exploitation has not yet begun, but 31 exploration contracts have been awarded in international waters.
DSM is subject to different legal regimes, depending on the location of the mineral deposits. Nation states have sovereign rights and regulatory authority over deposits found in their Exclusive Economic Zones (200 nautical miles from each state’s coastal baseline), and can apply to extend their jurisdiction to the continental shelf. The area beyond national jurisdiction is known as “the Area” and governed by the International Seabed Authority (ISA) – a multilateral, intergovernmental body created by the UN Convention on the Law of the Sea (UNCLOS).
Independent legal consultant Hannah Lilyadvised that there are legal uncertainties surrounding DSM on both international and national levels. The ISA’s member states are currently negotiating rules for DSM exploitation with a deadline of July 2023 – a deadline it seems likely to miss – with the current draft regulations still far from agreement. There is no guarantee that exploration licences will translate into exploitation contracts, with recent examples from Fiji and Tuvalu demonstrating that companies engaging in exploration are vulnerable to nation states banning or withdrawing support of DSM. Additionally, it is unclear whether or in which cases investors in DSM will be able to rely on legal protections under international investment law.
Under UNCLOS, the ISA is charged with prohibiting “serious harm” to the marine environment in its DSM rulemaking. However, gaps in scientific knowledge mean that regulators have not yet defined “serious harm” in specific terms, nor identified acceptable thresholds for damage. Some experts have suggested that at least a further decade of study will be necessary to inform a mining regime that would allow for effective environmental management, with the ISA currently having access to less than 1.5% of the data needed[1].
DSM operators will likely be subject to onerous and costly pre-exploitation baseline data collection requirements, and intensive monitoring obligations during and after mining, as regulatory authorities apply the “precautionary approach” – a principle of international law that apples where there is a lack of scientific certainty coupled with a risk of irreversible harm. DSM operators may also be liable for environmental damages incurred during operations under the “polluter pays” principle, while firms with operations in international waters could be subject to up to four different regulators and jurisdictions, with ongoing uncertainties over how regimes will overlap or conflict.
Financial institutions that plan to invest in, lend to or underwrite DSM activities face significant reputational, financial and regulatory risk, according to UNEP FI’s Dennis Fritsch. DSM faces significant emerging opposition from civil society, the scientific community, NGOs, and countries, with the IUCN notably calling for a moratorium on the practice last year. Financial institutions of the likes of Triodos, Credit Suisse and ABN Amro have as such already made moves to exclude DSM financing, while UNEP FI found in its recent DSM-focused briefing paper that the practice did not align with the UN Sustainable Blue Economy Principles.
Click here to view the outcomes of the next DSM roundtable, which heard from proponents of DSM including Michael Lodge, Secretary-General of the ISA.
[1] Amon et al 2022 ‘Assessment of scientific gaps related to the effective environmental management of
deep-seabed mining’, available here:
https://www.sciencedirect.com/science/article/pii/S0308597X22000537