First Sentier MUFG Sustainable Investment Institute publishes new report on ESG risks in the battery value chain
- Lithium and nickel demand to rise more than 40x by 2040 amid electric vehicle boom
- Environmental and social risks span mining, refining and recycling stages
- Investors urged to push for transparency, ethical sourcing, innovation and circularity
2 June 2025 – A new report commissioned by the First Sentier MUFG Sustainable Investment Institute and produced in collaboration with PwC Strategy highlights the urgent need for responsible investment in lithium-ion battery supply chains as global demand accelerates.
The report, Sustainable Lithium-Ion Batteries: Navigating the ESG Risks and Investment Opportunities in the Battery Value Chain, highlights that electric vehicle batteries could displace 8 million barrels of oil per day by 2030, driving the energy transition away from fossil fuels. Its analysis outlines how this transition is set to drive demand for lithium, nickel, cobalt and graphite up to fortyfold by 2040, producing significant investment opportunities.
The findings from the report also cautions that without decisive action, the rapid expansion of battery production could bring material environmental and social risks, particularly across extraction and processing. For instance, the report warns that more than 400,000 people are trapped in modern slavery in the Democratic Republic of the Congo’s mining sector, showing the need for stronger ethical and environmental safeguards across the value chain. Key risks identified include:
- Environmental degradation and water shortages caused by lithium brine mining in South America;
- Labor rights violations, including child labour and forced labour in cobalt and nickel supply chains;
- High carbon emissions and hazardous waste from refining operations in China and Indonesia; and
- Regulatory complexity, with fragmented global approaches despite progress such as the EU Battery Regulation and Battery Passport.
The report provides practical guidance for investors on how to address these risks and support a more sustainable battery ecosystem.
It sets out actions such as advocating for stronger corporate disclosure and due diligence, supporting second-life and recycling infrastructure, and backing innovation in low-impact technologies. Additionally, it outlines the importance of fostering partnerships with companies, investors, governments, and Non-Governmental Organizations NGOs to drive knowledge-sharing and innovation in sustainable best practices.
Alongside these actions, the report highlights promising developments including direct lithium extraction and biographite production, which could significantly reduce environmental harm and enhance supply chain resilience.
Sudip Hazra, Director of the First Sentier MUFG Sustainable Investment Institute, commented
“Batteries are critical to the energy transition, but the race to scale them must not come at the expense of people or the planet. This research shows that investors can be powerful agents for change by helping shape a more sustainable and transparent battery value chain. From ethical sourcing and emissions reduction to embracing circular economy models, there are clear actions investors can take today to mitigate risk and drive long-term resilience.
“This is on the radar of governments as much as it is investors and supply chain participants. For instance, the UK’s Government’s decision in late April to ensure that GB Energy will not source energy components linked to slave labour further reinforces the importance of responsible supply chains – a principle that must remain central in the global transition to net zero.”
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About First Sentier MUFG Sustainable Investment Institute
The First Sentier MUFG Sustainable Investment Institute is jointly supported by First Sentier Investors and Mitsubishi UFJ Trust and Banking Corporation, a consolidated subsidiary of MUFG. The institute aims to help increase awareness and encourage action on important but under researched and emerging ESG-related issues. It will publish research on topics that can advance sustainable investing. An external academic advisory board informs the institute’s research agenda and ensures its publications meet high standards of rigour.
For more information, visit https://www.firstsentier-mufg-sustainability.com/
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