The world needs minerals found in the Earth’s crust—and lots of them. Their prized properties render them essential. Smartphones use minerals to enable a touch response, emit glow and vibrations, provide high-quality audio and video, and extend battery life. The health care industry incorporates them to enhance magnetic resonance imaging and computed tomography -scan imaging. Stability in extreme temperatures is vital for submarines and satellites. Renewable energy solutions require minerals in multiples of their fossil fuel counterparts. Finally, quantum computing and artificial intelligence (AI) need them for stability and power usage. 

Global demand for minerals is expected to continue rising. The International Energy Agency (IEA) expects a 50 to 60 percent increase in demand for cobalt and rare earth elements over the next fifteen years, and a likely global shortfall in copper and lithium in the next ten. 
Yet the investment landscape is not structured to meet global demands. Mineral exploration investment “flatlined” last year to a mere $6.7 billion—a stark contrast to the IEA’s estimated $500–$600 billion needed by 2040 to meet projected demands. 

For over a year, the Milken Institute has conducted applied research, engaged in interviews, and curated convenings with stakeholders in mineral supply chains and our investor network to identify investment deterrents and innovative financing frameworks that could support sustainable and resilient critical mineral supply chains.

Investors from private equity to pension funds have highlighted the unique challenges of investing in mining. High early-stage capital needs and risks limit the profiles of investors. Exploration and deposit assessment entail land displacement, permit applications, pilot drilling, and feasibility studies, all of which take more than a decade. Volatile market and policy conditions alter the probability of success of ongoing projects. Once a project is approved, infrastructure build-out necessitates extensive consultation with local authorities and communities, and delays can occur. On average, it takes nearly 18 years for a mine to begin production. In addition, the potential of negative environmental, social, and governance (ESG) impacts from clearing sites, loss of biodiversity, extensive water use, and emissions increases the due diligence required and alters the risk profile of investments.  

While most investors have stepped back from financing mineral supply chains, one player has not. China has channeled more than $150 billion since 2013 through its Belt and Road Initiative into mineral extraction and refining operations around the world, from copper in Peru to cobalt in the Democratic Republic of Congo and nickel in Indonesia. With lower regard for ESG impacts, China has gained significant cost advantages and now dominates key supply chains with commodity manipulation—out of sync with the global need for stable and sustainable supplies. 

The industry faces scrutiny for a range of interconnected risks. Using econometric modeling, we find that large-scale mines significantly increase deforestation risk: Major tree loss events are 50 percent more likely in mining areas, with even higher probabilities near cobalt mines. Agriculture is also affected. In Sub-Saharan Africa, maize yields declined by 5 percent per hectare overall and by 9 percent near nickel mines. 

However, mining can have economic benefits that extend beyond investment at the site. By analyzing nighttime luminosity (a proxy for gross domestic product, or GDP) via satellite data, we found that GDP in developing country districts containing a large-scale mine was, on average, 7.7 percent higher after the mine opened than it would have been otherwise. 

Modern technologies can also address longstanding concerns. Drone mapping, automated drilling, and digital mine twinning can reduce land disturbance, improve worker safety, and lower emissions. Innovators we interviewed are reducing early-stage environmental impacts and shortening lead times by using AI, extracting rare earth elements from ore and mining waste with zero emissions, and repurposing waste into low-carbon construction materials. 
In the stakeholder interviews, innovators shared their struggle to secure financing to navigate the “valley of death” funding gap between concept and proven commercial viability. Government and accelerator are limited and highly competitive. Most private sector investors are discouraged by the long lead times for proof-of-concept and the extensive due diligence required. The mining industry is also risk-averse in the event of additional costs from delays or errors. Technology platforms have not coordinated efforts, and as a result, innovations that are rapidly scaling elsewhere struggle to gain traction at the same pace in mineral supply chains. 

In our conversations with investors, it was clear that a new financing framework was needed. A Syndicated Investment Model (SIM) resonated with them. Commonly used in industries with long lead times and high due diligence requirements, a SIM could be adapted for mineral supply chains. A group of anchor investors—such as family offices and innovation or climate-focused funds with decarbonization and ESG mandates—would pool initial capital. The fund would be managed by a lead investment team with mining industry expertise, helping demonstrate returns and attract new investor groups.

Investments would be channeled via Special Purpose Vehicles (SPVs) to accommodate investor risk profiles and mandates. This structure provides transparency and the option to opt out of investments that do not align. With proven success, SPVs focused on improving environmental outcomes could be securitized as green bonds to increase marketability. 

The world needs minerals in supply chains that are both diversified and sustainable. Our research, detailed in Innovative Financing for Resilient Critical Mineral Supply Chains and The Impact of Mining on Local Communities, shows how innovative investment frameworks can be applied to attract capital at a scale and diversity not currently available. We have identified a path to invest in technological applications and diversify portfolios with significant growth potential. By elevating the role of innovation, we can shape the ESG narrative and turn it into a catalytic force for greater investment. 

The timing is appropriate for this conversation. We look forward to engaging with you on our recommendations on how innovative financing frameworks detailed in the report can unlock new pools of capital, reduce risk, and secure resilient and sustainable critical mineral supply chains.