As the global community moves closer to the 2030 deadline for the United Nations' Sustainable Development Goals (SDGs), the demand for transition minerals such as lithium, copper, cobalt, and nickel has surged. However, this growing demand presents both opportunities and risks within supply chains. Without proper safeguards, extraction activities could lead to environmental degradation, displacement of communities, and increased global inequalities. Public development finance institutions and export credit agencies are emerging as key players in shaping how these resources are responsibly sourced.

A recent report from Boston University's Global Development Policy Center and Peru’s Universidad del Pacífico highlights the critical role these institutions play in promoting a just and sustainable transition. It also underscores the need for stronger environmental and social governance frameworks to guide investments in transition minerals. This article explores two central themes: the importance of aligning financial policies with sustainability principles and the necessity of enhancing traceability mechanisms in mineral supply chains.

Aligning Financial Policies with Sustainability Principles

Public development finance institutions (DFIs) and export credit agencies have become pivotal actors in financing the extraction of transition minerals. These organizations not only provide loans, guarantees, and insurance but also offer technical support to integrate environmental and social governance (ESG) practices into corporate operations. Despite their potential impact, significant gaps remain between current ESG performance levels and what is achievable. Upcoming policy reviews and updates present an opportunity to bridge these gaps.

In particular, five key processes in 2025 will shape how DFIs engage with transition mineral supply chains. For instance, China's Green Finance Guidelines aim to introduce key performance indicators that ensure transparency and accountability in overseas investments. Similarly, the reauthorization of the U.S. Development Finance Corporation offers a chance to reinforce its commitment to robust environmental and social risk management. Additionally, the review of the IFC Performance Standards must be grounded in evidence-based approaches to maintain credibility. The World Bank Evolution Roadmap seeks to expand concessional policy finance to middle-income countries, empowering environment ministries to integrate sustainability measures into national frameworks. Together, these initiatives underscore the importance of aligning financial policies with sustainability goals.

Enhancing Traceability Mechanisms in Mineral Supply Chains

Establishing enforceable traceability systems is essential for improving transparency, reducing environmental harm, and ensuring fair labor practices in transition mineral supply chains. Without such mechanisms, it becomes challenging to fully implement environmental and social standards across all tiers of the supply chain. This issue has gained prominence due to Colombia's pioneering minerals traceability initiative introduced at the 2024 United Nations COP16 biodiversity summit.

This initiative, set to be voted on during the upcoming UN climate conference (COP30) in Brazil, calls for multilateral support to advance traceability efforts globally. By promoting transparency, stakeholders can better address the environmental and social risks associated with transition minerals. For example, developing nations exporting large quantities of these minerals often lack the infrastructure needed to monitor extraction activities effectively. Strengthening traceability mechanisms would empower these countries to mitigate adverse impacts while capitalizing on economic opportunities. Ultimately, fostering collaboration among governments, financial institutions, and private sector entities is crucial for achieving a more equitable and sustainable transition.