Amid falling prices for copper, nickel and lithium, Mirova’s $14bn green funds are looking to add mining stocks, with potential to make their Luxembourg-domiciled fund the largest among article 9 peers. Mirova is a subsidiary of Natixis Investment Managers and focuses on sustainable and responsible investing. Jens Peers, co-manager of Mirova’s global sustainable equity strategy, pointed out in an interview that current valuations for many mining companies do not reflect their potential long-term benefits, Bloomberg reported on 9 September 2024. As global efforts to meet net-zero goals intensify, the demand for energy transition metals is expected to roughly double by mid-century. Peers noted that an accelerated energy transition could lead miners to invest in higher capacity, which is not yet factored into current stock valuations.
Copper and battery metal prices
Key materials like copper, lithium and nickel have seen significant price declines, contributing to the revaluation of mining companies. Copper, a crucial element in electrification, has dropped more than 17% from its peak in May. Meanwhile, prices for battery metals such as lithium and nickel are hovering near multi-year lows. The slowdown in electric vehicle growth and China’s weakened economic activity have also reduced demand for these commodities, further driving down the market value of leading miners.
Mirova’s Luxembourg-domiciled funds
Mirova’s Luxembourg-domiciled green funds, which manages $5.9bn in assets collectively and adheres to the European Union’s article 9 sustainable investment regulations, has posted gains exceeding 15% this year, Bloomberg has stated. The fund’s performance stands out within the sustainable investment sector, and if it adds mining stocks to its portfolio, it would become the largest fund among more than 30 article 9 peers with exposure to the mining industry, according to the news service.
Valuation opportunities
The decision to reconsider mining stocks coincides with a decline in valuations of major minimg and energy transition metal producers, such as BHP, Glencore and Anglo American. A gauge of these companies is currently trading at 12.5 times forward earnings, a sharp decrease from its peak of over 80 times in 2020. This drop in valuations offers potential investment opportunities for funds like Mirova’s, which are positioning to take advantage of the growing importance of metals in the energy transition.
Mirova’s interest in mining stocks also reflects a broader debate on the role of transition strategies in sustainable investing. Peers noted that directing capital toward companies that need to reduce their environmental impact may be more effective than excluding them entirely from sustainable portfolios. He acknowledged the challenge of balancing positive environmental impact with the unavoidable negative effects of some companies within the value chain.
Peers remarked, “Sometimes you cannot create a positive impact without having some companies in the value chain that you know by definition have some negative impact as well.”