Over the 2010s, interest in Environment, Social, and Government (ESG) style investment has skyrocketed, due to concerns over climate change, environmental destruction, and the simple growth of “green” businesses. Long considered a fringe element of the global trading scene, green finance has moved into the mainstream. Even despite the massive dip in overall trading caused by the COVID-19 pandemic, ESG investment saw continued growth even when the market was down. In 2014, energy companies spent $735 billion on oil and gas extraction, and over the next six years that figure dropped by half, while spending on wind and solar rose to nearly $220 billion. Some analysts even predict that spending on renewable energy will exceed oil and gas in the next several years. These are all good things, of course, but as the spending spree has only just begun, it’s important to investigate its current trajectory and get an idea of how much Pacific nations can really benefit.
The first clue comes, surprisingly, from far across the world, in the European Union. In March of this year, the EU released a set of new rules called the Sustainable Finance Disclosure Regulation, or SFDR, in order to regulate how ESG investments are defined. Before the development of these rules, there was no hard definition for what constitutes “sustainable investment,” allowing fund managers and ratings firms to set their own definitions. For instance, in 2019 it became clear that 8 of the 10 biggest sustainable funds in the U.S. were still invested in oil-and-gas companies. These concerns led the EU to develop the SFDR in order to combat greenwashing, or exaggerating the overall environmental sustainability of a company in order to garner ESG investments, requiring companies to report data in order to be considered truly sustainable. Though cutting off greenwashing companies from European investment will help, ESG investment in the Asia-Pacific region has already grown over $69 billion dollars this year alone, and the region has no such protections.
Green investing’s focus on electric cars and renewable energy has caused an uptick in interest in battery technology. Since these batteries require rare earth metals, a number of mining companies have begun marketing themselves as “green” because they supply the products and materials required by companies like Tesla and others. This strategy works, as can be seen in the example of a California open-pit rare-earth mine, which managed to secure a merger with a supposedly sustainable investment company despite its history of environmental problems by claiming that it qualifies as green because its minerals are needed for electric cars and that it doesn’t do as much harm as overseas rivals.
In the Pacific, which has a history of problems with powerful mining companies, these concerns are even greater. The best example of this problem is Gerard Barron’s new seabed mining venture, called The Metals Company (TMC), which markets itself as green. This isn’t Mr. Barron’s first time trying his hand at deep-sea mining, his first attempt destroyed a sensitive seabed habitat and left him in trouble with Papua New Guinea’s government. Though he appears to have changed little to nothing about his operating strategy, planning to simply reacquire his assets from the first attempt and try again, he’s set to receive nearly $600 million in investor cash. The company planning to merge with TMC, Sustainable Opportunities Acquisition Corp, met with more than 90 companies before making a decision, and the general counsel described the process as “like speed dating.” The likelihood of these investment opportunities being investigated thoroughly in this environment is slim to none, allowing companies that might not be as green as they want to appear to slip through.
Deep-sea mining, however, appears to be facing some of the strongest resistance by the overall environmentalist community despite its continued evaluation as “green” by investors. Biologists, oceanographers, and famous environmentalist David Attenborough have been calling for a halt to all deep-sea mining projects for years. The World Bank warned of “irreversible damage to the environment and harm to the public,” caused by deep-sea mining, backed up by the results of Barron’s earlier project, which drove away sharks locals used in traditional ceremonies. However, much of the world’s deep-sea metal lies not within territorial waters but in international waters, which are regulated by the U.N.’s International Seabed Authority, which has never issued a mining permit or even decided on mining rules. TMC wants to operate away from territorial waters after Mr. Barron’s previous trouble with Papua New Guinea, now focusing on the area roughly between Mexico and Hawaii, which Mr. Barron describes as “a desert” where miners can pick up metal nodules “like golf balls.” Overlooking the ecological diversity of deserts, oceanographers countered that the region is actually a little-explored ecosystem where new species are still being discovered, such as a bright yellow sea cucumber with a curled tail and a “walking squid” that traverses the seafloor with its tentacles like Squidward from Spongebob. A recent study done to simulate deep-sea mining showed that a similar environment still hadn’t recovered even 26 years after the original experiment.
For Mr. Barron’s part, he claims that the concerns are misguided, citing that land-based miners dig up rainforests and use child labor, making deep-sea mining a better option. TMC also granted $2.9 million to researchers for a study of the mining area, causing scientists to sign on as it’s a rare opportunity to explore a remote environment. On a company-funded podcast, Mr. Barron said, “I’m doing this for the planet and the planet’s children.” He and his business partners, David Heydon and his son Robert Heydon, are currently seeking an exploration license in the region through a company based in Nauru previously owned by Mr. Barron’s old company. TMC has paid money to Nauru for public benefits, including college scholarships for two students, one of whom was the niece of Trade Minister Mike Aroi, the official in charge of deep-sea mining.
Only time will tell what deep-sea mining and other similar investments will bring to the Pacific, a region traditionally and systematically used and abused by multinational mining corporations. Just last week, TMC added a new risk factor in a regulatory filing, warning that the environmental impact of its techniques “could potentially be more significant than currently expected.”