With many economies around the world committing to build back greener post-COVID-19, could we be on the brink of a new commodity supercycle?
According to the United Nations Environment Programme, a green economy is defined as low carbon, resource efficient and socially inclusive. In a green economy, growth in employment and income are driven by public and private investment into such economic activities, infrastructure and assets that allow reduced carbon emissions and pollution, enhanced energy and resource efficiency, and prevention of the loss of biodiversity and ecosystem services.
The transition to a green economy could create a significant demand for commodities such as copper, cobalt, lithium, graphite, rare earths, tin and nickel.
African could play an instrumental role as a supplier of the commodities needed to support the growth of the green economy, with many junior mining companies (and a few majors) developing battery metals projects across the continent.
Better yet, the prices of these commodities have been on the up since the COVID-19 pandemic due to supply constraints and these prices continue to rise as demand increases to build green infrastructure increases.
Mark Lewis, chief sustainability strategist at BNP Paribas Asset Management, was quoted as saying that the next three decades are likely to bring a supercycle in investments in clean energy infrastructure, clean transportation and everything else that is required to make the green transition possible.
For investors, especially those that were less inclined to invest in mineral stocks because they don’t quite scream sustainability, the ability to invest in commodities that will be used to advance green energy, infrastructure and transport may sway investor perception of mining stocks.