The world is moving from a fossil-fuel based energy system to a metals based system. In building the infrastructure necessary to harness the energy that exists in the natural world, such as wind and solar, we will use vast quantities of metal. For example, the shift away from carbon dependency seems to be mineral intensive; the rapid deployment of clean energy technologies such as electric vehicles (EVs) requires much more copper, lithium, nickel and graphite than for conventional cars.
Metals and commodities in general are central within the various decarbonisation technologies given the infrastructure build out that is required. In addition, similar to how the metals and mining sector is going to play an important role in decarbonisation and other sustainability challenges, we see the agriculture sector as an essential cog in the machine, whether this is through the fertiliser industry, protein industry, biological crop protection sector and so on.
The transition towards a low-carbon economy is creating an investment cycle across a wide range of natural resources that will play a key role in global decarbonisation. This may present a compelling opportunity in the years to come.
Producers of materials and products for the transition.
The transition will result in increased investment in the ‘climate solutions’ required to move towards a decarbonised economy. This will create demand for materials, products, equipment and industrial processes which have direct links to natural resources.
Companies with a credible transition plan.
The heavy emitters which can evolve successfully may be rewarded by higher multiples, lower cost of capital and greater levels of investor interest and participation.
Financial metrics are improving across the sector.
However, valuations of the natural resources sector continue to trade at a discount to the broader equity market.
Capturing new dynamics in commodity markets