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Launching the Net Zero Transition Materials (NZTM) model
20 analysts from across the Global ESG and Mining teams collaborated to assess the implications of the net zero commodities transition. We launch the NZTM model to enable investors to assess the relative positioning of 34 different materials critical to net zero across 26 metrics covering Demand, Supply, Circularity and Impact. Each of the metrics can be flexed against several future scenarios, such as varying energy transitions, technology pathways and circularity outcomes, providing investors with a comprehensive toolkit for identifying NZTM investment opportunities.

The energy transition requires a commodities transition
Society is in the midst of a global transition to lower carbon technologies. To achieve this, there is a growing realisation that Net Zero not only requires an energy transition, but a commodities transition. Put simply, the growth in new low carbon products requires larger material input per unit of output vs the fossil fuel energy system, resulting in a secular increase in demand under the net zero economy. Investors face a confluence of unprecedented demand growth and rising supply disruption risks – from growing geopolitical forces, climate, water to fundamentally mismatched production demand and reserves. Counterintuitively, Net Zero materials also create a climate paradox: BAU cumulative emissions to 2050 would absorb 10% of the Paris Budget.

Net Zero demand creates opportunities but also faces severe supply constraints
Questions arise as to whether supply can grow fast enough to meet demand. Cumulative demand to 2050 for Zinc, Nickel, Cobalt and Copper would use more than 100% of the known reserves today. Zinc and Nickel have the highest utilisation with cumulative demand 2.5x and 2x respective reserves. Supply disruptions will impact the ability of the global economy to deploy decarb technologies and shift supply-demand dynamics. We assess the location of production and reserves against a set of disruption risks indicators - covering geopolitical, climate change and water - and find that all materials have at least 70% of supply exposed to at least one of the three risks. 

APAC is the cornerstone of the commodities transition
Our research shows that 42% of NZTM production and 41% of the world’s reserves are located in APAC. Moreover, 21 critical materials have over 50% of current production in APAC and 13 critical materials have over 50% of known reserves in APAC. With a substantial proportion of the growth in renewables capacity additions also occurring in the region, this positions APAC as central to all parts of the clean technology value chain.