European financial institutions are increasingly exposed to major financial and reputational threats due to their inadequate handling of environmental, social, and governance (ESG) risks linked to critical mineral mining. A new report warns that the weakening of EU due diligence requirements is amplifying these vulnerabilities at a time when global demand for raw materials such as lithium, nickel, and copper is rapidly accelerating.
According to the analysis, banks, investment funds, and other financial actors across Europe are “significantly falling short” in assessing and mitigating the harmful impacts associated with mining projects in regions supplying essential minerals for the clean-energy transition. These shortcomings—ranging from insufficient environmental assessments to a lack of community impact evaluations—leave European investors increasingly exposed as global scrutiny over mineral supply chains intensifies.
The report stresses that the EU’s decision to scale back its due diligence ambitions risks undermining the bloc’s own environmental leadership. By easing requirements instead of strengthening them, policymakers are unintentionally enabling investment practices that overlook pollution risks, land degradation, water scarcity, and human rights concerns often tied to mining operations worldwide.
Financial institutions remain central to the expansion of critical mineral extraction, yet many continue operating without robust frameworks to evaluate high-risk projects. Experts argue that this disconnect threatens not only local ecosystems and communities but also Europe’s strategic push to secure stable supplies of raw materials for renewable energy technologies.
As competition for global mineral resources intensifies, the report calls for immediate, mandatory, and transparent due diligence systems across the financial sector. Strengthening ESG standards, it notes, is no longer a matter of corporate responsibility but a decisive factor in protecting long-term investor value and preserving Europe’s credibility in the global transition toward cleaner and more sustainable industries.
