Bain: 'Inflation Dampening Mining Leaders' Net Zero Hopes'

A growing number of mining executives are among key energy industry executives who believe 2050 net zero targets will not be met, a new Bain energy survey shows.

Almost two-thirds (62%) expect global net zero goals are unlikely to be met until 2060 or later, according to Bain & Company’s fourth annual Energy & Natural Resource Executive Survey.

Year on year, pessimism over progress on net zero has grown, with just 54% saying in the 2023 survey that they doubted the 2050 target would be met.

Bain surveyed around 600 industry executives worldwide, in mining, oil and gas, utilities, chemicals and agribusinesses, canvassing views on energy transition issues, emerging technologies and opportunities around investment. Those surveyed were also asked where they see the greatest challenges for decarbonisation.

One of the cited barriers to net zero progress is a lack of adequate investment returns on sustainability initiatives. 

Bain: High cost of energy transition projects 'a barrier'

The report’s authors point out that, although energy and natural resource companies remain ambitious around transition-oriented commercial operations, the higher costs involved are an issue because “customers’ willingness to pay is a growing issue”. 

The report says: “Like last year, executives say the greatest obstacle to scaling up their transition-oriented businesses is finding enough customers willing to pay higher prices to create sufficient return on investment.”

It added that the number of executives identifying this as a significant roadblock increased from 2023 to 2024 by 14%, to 70%.

They also note the impact of higher interest rates on the cost of transition projects is compounding negative executive opinions around transition projects.

Bain found that a 500-basis-point increase in the cost of capital can increase the total annual revenue required to finance a project by as much as 50%. 

A basis point is a unit of measure used in finance to describe the percentage change in the value or rate of a financial instrument.

The sustainable energy landscape has changed in the past couple of years. According to GlobalData, in 2022 the mining industry responded to consumer and shareholder demand for portfolio diversification and sustainability with 25% of the top 20 mergers and acquisitions deals.

“As a result, companies are focusing on projects with a viable ROI path,” said Joe Scalise, Head of Global Energy & Natural Resources. “The longer the executives are at the front lines of the energy transition, the more sober they are getting about the transition’s practical realities.”

EMEA more optimistic about renewables

The survey shows that executives in the Middle East (61%), Asia-Pacific (55%), and Latin America (51%) are more optimistic around renewables, hydrogen, bio-based products, and lithium and other transition commodities that will contribute to their company’s valuation and profits by 2030. Bain says that this is why such businesses are maintaining or increasing green investments. 

In Europe, optimism is more muted, with just 30% of executives sanguine about transition-related opportunities. This compares to 27% who are less optimistic about the profitability of transition projects.

It’s a similar story in In North America, where 29% of respondents are positive, with 17% being pessimistic. 

The survey also suggests that North America is seen as an attractive region for green investments, with 79% of executives viewing it favourably in this regard. The next most attractive region is Europe, at 65%. Australia and New Zealand come in next, at 43%. 

The report’s co-authors are:

• Joe Scalise, Head of Global Energy & Natural Resources 

• Neelam Phadke, EVP, Global Energy & Natural Resources 

• Grant Dougans, Partner