The IFoA established the Geopolitics in Sustainability Working Party in late 2025, under the Sustainability Board. Our members come from across actuarial practice – academia, risk, reinsurance, consulting, life, non-life and pensions – and our aim is to raise awareness of geopolitical trends in sustainability that are likely to shape actuarial work in the years ahead.

This is the first in a planned series of blogs. We welcome your engagement and feedback.

The global transition to a low-carbon economy is often framed through the lens of emissions targets and policy frameworks. But the energy transition will not be built from carbon targets and capital alone (Net Zero Institute, 2024) – it will also be built from critical minerals.

Critical minerals are essential natural resources, such as lithium, cobalt, and rare earth elements, which are vital for modern technology, defence, and the green energy transition. There is no single list of critical minerals with an agreed definition of ‘critical’, with criteria and context varying substantially by country. However, a mineral might be classed as critical if there is instability in the producing country, if it is difficult to substitute one mineral for another, and if very few countries dominate production.

Energy transition and mineral demand

The deployment of clean energy technologies will need to accelerate at a rapid pace to meet the 2015 Paris Agreement goals. Clean energy technologies tend to be far more mineral-intensive than their fossil-fuel counterparts. The International Energy Agency (IEA) estimates that an electric vehicle typically “requires six times the mineral inputs of a conventional internal combustion engine car", and that an “onshore wind plant requires nine times more mineral resources than a gas-fired plant”.

Lithium, nickel, cobalt, graphite and manganese sit at the heart of modern battery chemistries, while rare earth elements such as neodymium and dysprosium are essential for the high-strength permanent magnets found in wind turbine generators and EV motors (International Energy Agency, 2022). In a scenario consistent with net zero by 2050, the IEA projects that total mineral demand for clean energy technologies will quadruple by 2040 (International Energy Agency, 2022).

A map of concentration: The geopolitical bottleneck

There is an inherent mismatch between the demand and supply of critical minerals. Reserves of several key materials are particularly highly concentrated. Around 70% of cobalt is produced in the Democratic Republic of Congo, almost 50% of global nickel output is in Indonesia, roughly 50% of lithium is mined in Australia, and a large share of rare earth production is in China. Processing and refining these metals are even more concentrated, with China accounting for more than half of the world’s refined supply of natural graphite, cobalt, lithium, manganese and certain rare earths, and close to 90% of global mine-to-metal rare earth refining (International Energy Agency, 2022).

From a geopolitical perspective, this concentration is occurring just as major economies frame critical minerals as strategic assets. Analyses of global supply chains highlight that China refines around 60 to 65% of battery-grade nickel and lithium. China also dominates rare earth magnet manufacturing, giving it significant leverage over downstream clean-tech industries.

Other production countries, such as Indonesia and Chile (for nickel and lithium, respectively), are also re-examining how much value is captured domestically through taxes, processing mandates and ownership rules. Goldman Sachs has estimated that in the last 15 years, there has been a five-fold increase in export controls on critical minerals (Goldman Sachs, 2023).

Readers interested in the underlying information on mineral use in clean energy technologies, demand projections, and the geographical distribution of processing and extraction can find the relevant charts in the IEA's report on The Role of Critical Minerals in Clean Energy Transitions.

Relevance to actuarial work

The geopolitical concentration of critical minerals has direct implications for actuarial practice across multiple sectors. The International Renewable Energy Agency (IRENA) identifies six key supply chain risk categories relevant here: external shocks, export restrictions, resource nationalism, mineral cartels, political instability and social unrest, and market manipulation. Taken together, these represent a material and growing source of systemic risk – one that cuts across investment, insurance and long-term savings.

For financial institutions, the geographical clustering of extraction and refining creates material concentration risks that conventional sector or country exposure frameworks were not designed to capture.

For insurers of large infrastructure projects, for example, delays or cost overruns linked to mineral supplies may become an increasingly material driver of construction, surety and project risk. Additionally, mining expansion interacts closely with indigenous land rights, livelihoods, governance capacity and – as is long-established in general insurance underwriting – water use and pollution.

Increasingly, a number of human-rights, social-unrest and environmental liability costs have accompanied infrastructure projects in mining of critical minerals. Actuarial models relying solely on macroeconomic or supply-chain factors may materially underestimate delay, abandonment and litigation risk, as a result. We return to the environmental dimension later, in the context of supply diversification and governance.

As universal asset owners, financial institutions are likely to have exposure to investee companies across different regions, countries, sectors and sub-sectors in diversified investment portfolios. While direct investment exposure to issuers involved in the metals and mining industry may only make up a relatively small proportion of a diversified investment portfolio, financial institutions will need to assess the extent to which they are exposed to wider geopolitical risk through the upstream and downstream activities of such companies (and the wider role they play in local, national and regional economies).

Where investee companies have significant dependence on the critical mineral supply chain (such as clean energy technologies as described above), financial institutions should conduct scenario analysis to understand the extent to which different magnitudes of disruption or pricing adjustment in the supply chain could flow through to an impairment on company value. In practice, this could be incorporated through stress-testing of input costs within existing equity and credit valuation models, or by flagging critical mineral dependency as a standalone risk factor within sector exposure analysis – similar to how carbon price sensitivity is already treated in some climate scenario frameworks.

This information is often obtained by firms through targeted stewardship and engagement activities, often conducted directly, through asset management partners, and/or through collaborative initiatives such as Climate Action 100+ and CDP. The latter's water security disclosure framework is particularly relevant to environmental governance questions at extraction sites, including freshwater withdrawal and use, and pollution control.

While financial institutions may be able to actively trade in the credit and equity of metals and mining companies listed on internationally recognised stock exchanges, the speed with which geopolitical risk could crystallise demonstrates that firms need to be aware of thresholds or trigger points at which they would choose to rotate out of such exposures in stress events.

This requires firms to conduct detailed analysis to understand the complexity of critical mineral supply chains and how an event or impact on the other side of the world could cause a ripple effect through a number of sectors, creating a last mover disadvantage risk for those not proactively identifying, measuring and managing geopolitical risk.

For financial services and actuarial professionals accustomed to thinking in terms of long-dated liabilities and systemic risk, this geopolitical shift means that exposure to critical minerals is no longer a niche mining topic. It is becoming a core channel through which climate policy, technology choices and geopolitical tensions transmit into portfolios, product design and risk models.

For actuaries working in life, pensions and long-term savings, these trajectories imply decades long dependencies on a set of upstream inputs whose supply dynamics, price volatility and policy risks are very different from those of oil and gas.

Actuarial approaches will therefore need to evolve, supported by richer data – for example, supply chain mapping of investee companies' upstream mineral dependencies, country-level concentration metrics, and forward-looking indicators of policy and export-control risk – to incorporate the systemic and cascading risks embedded within critical mineral supply chains.

The evolution of general insurance risk

A less visible but growing risk concerns the health impacts on communities near extraction sites. The exploitation of critical minerals and rare earth deposits cause several environmental and health risks due to the presence of radionuclides like uranium, thorium, radium and polonium to name a few (Springer Nature, 2020). These elements, capable of emitting alpha, beta and gamma radiation affect the natural ecosystems (air, water, soil) through their dispersion.

Additionally, the oxidisation processes increase the environmental acidity leading to severe consequences on human health. Elevated concentration of light and heavy rare earth elements has been found in urine samples of the population in mining districts with high concentration of global rare earth reserves. In other regions, vegetables were detected with high concentrations of rare earth elements. Concentrations of cerium and lanthanum were also detected in molluscs collected from marine aquaculture ecosystems receiving water discharges from mining industries. The exposed populations from such regions report damage to kidneys, liver, lungs, immune systems and metabolic/genetic disturbances.

This points to worsening mortality and morbidity outcomes in geographies with high concentrations of critical minerals – and underscores the need for insurers to engage with health experts and conduct experience studies to accurately price products in affected regions (Springer Nature, 2025).

Beyond the direct health implications, these dynamics also point to a more familiar general insurance exposure: pollution liability. Such liability is a long-standing feature of extractive industries, but the risk is not confined to mining. Refining, battery and component manufacturing, and recycling are all fast-growing parts of the critical minerals value chain, and – unlike extraction – are not bound to where the minerals occur in nature.

Several governments, particularly in the US and parts of Europe, are actively encouraging these activities to be re-shored closer to end markets, as part of a wider push to reduce reliance on a small number of producing and refining countries. This may bring new and often first-time operators into the sector, and a governance and oversight question that applies as much to established economies as to developing ones.

Insurers underwriting liability risk across this expanding value chain will need to pay close attention to the governance and oversight profile of these new entrants, regardless of jurisdiction, and to whether operators adopt responsible environmental practices that go beyond minimum regulatory compliance.

As global insurance portfolios undergo a ‘green pivot’, the underlying exposure to critical mineral shocks is growing. In the past, a trade embargo on specific minerals might have been a niche concern for specialised manufacturing underwriters. In the future, this could become a systemic risk that permeates motor, property, and renewable energy lines.

As the proportion of green assets in an insurer’s portfolio increases, so too does the potential for a ‘critical mineral shock’ – whether through price volatility or supply chain failure – to act as a systemic catalyst for claims. A sudden geopolitical crunch could lead to a price surge in replacement parts essential for the green transition, such as battery cells for electric vehicles or permanent magnets for wind turbines. This in turn may impact actuarial work in various ways:

• Incorporating mineral-related disruptions into realistic disaster scenarios as foreseeable geopolitical contingencies.

• Allowing a ‘systemic load’ in pricing to account for the inherent volatility of the critical mineral supply chain.

The green transition also necessitates a shift toward a circular economy, which introduces a unique set of risks and opportunities for product liability and recall lines.

Furthermore, the geopolitics of minerals is increasingly manifesting as a professional and management liability concern. Directors and officers are now under intense scrutiny regarding their ‘transition readiness’ and the robustness of their supply chain disclosures. A failure to anticipate a mineral-driven bottleneck could be framed as a breach of fiduciary duty or ‘geopolitical incompetence’. For actuaries, this means that a firm’s risk profile is no longer just about its carbon footprint, but about the strategic foresight embedded in its procurement and design processes.

The conversation starts here

Actuarial training equips us well to think rigorously about uncertainty, long-term dependencies and systemic risk – and critical minerals sit squarely within that territory. But the geopolitical dimension of sustainability is a relatively new lens for most of us, and the landscape is shifting rapidly. No single blog, working party or profession has the full picture.

Our aim with the blog series is a modest but hopefully, a useful one: to bring together threads from across the literature and from our own varied actuarial experience, and to surface questions that we think deserve more attention from the profession. We expect to learn as much from the conversation as we contribute to it.

What resonated with you? What did we miss? And what would you like us to explore next? We'd love to hear from you.

References

Goldman Sachs. (2023). Resource realism: The geopolitics of critical mineral supply chains. Retrieved from https://www.goldmansachs.com/insights/articles/resource-realism-the-geopolitics-of-critical-mineral-supply-chains

International Energy Agency. (2022). The Role of Critical Minerals in Clean Energy Transitions. Retrieved from https://www.iea.org/reports/the-role-of-critical-minerals-in-clean-energy-transitions/executive-summary

International Renewable Energy Agency. (2023). Geopolitics of the Energy Transition. Retrieved from https://www.irena.org/Digital-Report/Geopolitics-of-the-Energy-Transition-Critical-Materials

Springer Nature. (2020, June 10). Minerals and the Metals for the Energy Transition: Exploring the Conflict Implications for Mineral-Rich, Fragile States: https://link.springer.com/chapter/10.1007/978-3-030-39066-2_12

Springer Nature. (2025, June 22). Environmental, health and social acceptability issues associated with rare earth elements: a systematic literature review: https://link.springer.com/article/10.1007/s44274-025-00274-y

Net Zero Institute. (2024). Critical Minerals and Materials - The sustainable supply of materials for the clean energy transition. Retrieved from https://www.sydney.edu.au/content/dam/corporate/documents/net-zero-institute/nzi_critical_minerals_white_paper_final.pdf