- Minerals and the Just Transition
The global push for a low-carbon economy is urgent – but also resource-intensive. Meeting climate targets requires a massive expansion of renewable energy infrastructure – including wind turbines, solar panels, and battery storage systems. These technologies rely on so-called transition minerals such as nickel, cobalt, copper, titanium, and rare earth elements (REE) in their supply chains.
At the same time, several studies note that both mineral extraction and large-scale renewable energy projects raise significant human rights and environmental concerns (Baumann-Pauly, 2023; Wang & Lo, 2021; Mancini & Sala, 2018; Hansen et al., 2016). As observed by Heffron (2021) and Savaresi (2016), this challenges the commitments under the Paris Agreement, which calls for a just and fair transition, safeguards the rights and needs of affected communities.
Owen et al. (2023) highlight that mining activities are linked to deforestation, water contamination, threats to community health, displacement, human and labour rights violations, and, in some cases, armed conflict. Studies show that these risks are most acute in regions with weak governance, where many key deposits are located.
Importantly, these issues are not limited to the Global South. Studies such as Mestad (2024) and Bjørst et al. (2022) describe that in the Arctic and Nordic regions, strong local and Indigenous opposition to mining and energy projects highlight similar concerns over rights violations and environmental harm.
As the demand grows, the frontier of mineral extraction is expanding into increasingly high-risk environments.
- Deep-sea Mining: A New Frontier for a Just Transition
The search for critical minerals has recently expanded into the ocean, where extractive companies and policymakers are accelerating efforts to advance deep-sea mining (DSM). Our ongoing research identifies DSM as one of the most pressing and under-regulated frontiers in the energy transition. Targeting polymetallic nodules and hydrothermal vent areas rich in manganese, cobalt, and zinc, DSM operations focus on seabeds located 3,000–6,500 meters below the surface (Chin & Hari, 2020; Washburn et al., 2019).
In 2024, the Norwegian government considered opening for DSM licensing rounds within its exclusive economic zone (EEZ), temporarily shelving these plans shortly after. However, in April 2025, United States signalled its intent to move forward with DSM projects by supporting The Metals Company’s exploration activities in the Clarion-Clipperton Zone, located outside the national EEZ. These international waters are part of the so-called ‘Area’ – a region designated as the common heritage for humankind under the UN Convention on the Law of Sea (UNCLOS) . Yet, the US is not a party to the UNCLOS and therefore not bound by its DSM licensing framework.
Hosting fragile ecosystems, the ecological and wider systemic impacts of mining in these depths – ranging from severe biodiversity loss to the disruption of the ocean’s carbon sink function and marine food chains – are not well understood. From a human rights perspective, DSM also raises complex questions. Communities reliant on marine ecosystems—particularly coastal populations—face indirect but potentially severe livelihood and food security threats, while a broader population may be affected by adverse systemic consequences. As demonstrated by scholars such as Macchi (2025) and Washburn et al. (2019), the UN, and investor coalitions, this has raised serious concerns among scientists, governments, and financial institutions alike.
- Why Investors Matter in the Just and Fair Transition
Studies by IMF and other international finance institutions show that the transition to low-carbon energy systems requires substantial capital investment—particularly in the expansion of renewable energy infrastructure and mineral extraction, both of which are highly technology- and capital-intensive.
Our research therefore highlights that financial actors—especially institutional investors—play a pivotal role in enabling this transition. As observed by Park (2018), their capital allocations significantly influence both the pace and direction of developments in clean energy and critical mineral supply chains. Yet, with this enabling role comes a corresponding responsibility.
Both Park (2018) and the OECD observe that beyond providing capital, institutional investors—given their scale and reach—can shape market norms, expectations, and practices around responsible business conduct (RBC).
Pension funds are particularly central in this context. As stewards of long-term savings, they are accountable to beneficiaries who are increasingly concerned with the ethical and environmental implications of their investments. Additionally, investors are increasingly expected to take responsibility for environmental and human rights impacts associated with their portfolios—even when they are indirect. In doing so, they can serve as key drivers of a transition that is not only fast but also respects the rights, needs, and concerns of affected communities.
- Leverage: A Key Tool for Investors
The UN Guiding Principles on Business and Human Rights (UNGPs) and the OECD Guidelines for Multinational Enterprises provide widely recognized transnational governance frameworks that prescribe risk-based sustainability due diligence (SDD). They call on companies to identify, mitigate, and remedy adverse human rights and environmental impacts across global operations and supply chains.
A core concept for financial companies within these frameworks is ‘leverage’. According to UNGP 19, leverage refers to a business’s ability to influence—directly or indirectly—the conduct of an entity responsible for harm, such as a supplier, investee company, or host government. Further, the general OECD guidance on due diligence and for the financial sector, specifically, elaborates that for institutional investors, who often operate through intermediaries in a value chain, leverage is typically exercised through tools such as voting strategies, shareholder resolutions, and industry benchmarking. Building on those points, we argue that more proactive approaches for investors should seek to upscale direct engagement with business partners, capacity building for investees or public authorities, and coordinated actions with other investors.
- Gaps in Practice and Structural Barriers
Studies show that the implementation of sustainability due diligence (SDD) remains fragmented and rarely evaluated for its actual impact on affected communities, and that complex investment chains create significant information asymmetries, while weak and inconsistent assessment methodologies hinder effective risk identification (Barrera et al., 2018; Buhmann 2023). Despite the growing recognition of the UNGPs and OECD Guidelines, unclear guidance and inconsistent application continue to limit their practical effect. For institutional investors, this means that many still lack effective mechanisms to identify or address human rights and environmental risks—particularly those affecting stakeholders far down the value chain.
In the European Union, regulatory fragmentation has further complicated matters. While instruments like the Sustainable Finance Disclosure Regulation (SFDR) and the EU Taxonomy align with the UNGPs and OECD Guidelines, the exclusion of the financial sector from the Corporate Sustainability Due Diligence Directive has created confusion about investor obligations.
Our research highlights several persistent barriers. Limited internal capacity, resource constraints, and a narrow focus on financial returns often limit the ability of pension funds to engage meaningfully with ESG risks. Delegating investment decisions to external asset managers—particularly in infrastructure and energy transition projects—reduces oversight and further distances investors from affected communities.
Additionally, many funds rely on self-reporting from portfolio companies—information that often fails to capture the perspectives or lived realities of rightsholders. Interviews undertaken in the context of our research suggests that even among investors with advanced due diligence frameworks, applying leverage beyond the first tier of relationships remains a major unresolved challenge.
- Toward a More Ambitious Understanding of Leverage
The UNGPs do not restrict leverage to first-tier relationships or specific contractual forms. Considering the urgency of the energy transition – and its potential for human rights and ecological harm – we argue that investors should broaden their understanding of leverage.
Our research supports a more expansive and innovative approach to how leverage is exercised across the full value chain. This includes not only direct engagement with investees, but also structural and strategic interventions aimed at transforming how responsible business conduct (RBC) is implemented.
Such innovative forms of leverage could include building alliances and investor networks to collectively influence large companies—through, for example, coordinated shareholder engagement at annual general meetings. Pension funds might also invest in capacity-building initiatives with portfolio companies, encouraging them to cascade responsible business conduct further along their value chains.
Importantly, these strategies could be complemented by bottom-up approaches. For instance, investors could support affected stakeholders in strengthening their capacity to assert their rights through meaningful engagement in energy transition and mining projects.
As highlighted in the just transition literature, such as Wang & Lo (2021) and Heffron (2021), enhancing both dimensions is essential—not only to improve the legitimacy of sustainability governance, but also to ensure that investor practices contribute meaningfully to a just and equitable energy transition.
- Bridging the Distance Between Capital and Impact
For many pension funds, the distance—both organizational and geographic—between their investments and affected stakeholders remains a key challenge. This raises difficult but essential questions about how leverage can be meaningfully understood and exercised by actors who lack direct access to the people most impacted by the projects they fund.
Closing this gap is critical. Responsible investment must not only ensure long-term financial returns, but also actively contribute to a transition that is environmentally sustainable and grounded in human rights. Doing so will require new thinking—conceptually, methodologically, and strategically—about how RBC can be cascaded throughout investment chains.
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