Cleaner Energy, Higher Risk? Firm-level Exposure to Critical Minerals
Viet Nguyen  1@  
1 : London School of Economics and Political Science

The rise of clean energy technologies has made a sub-group of minerals – lithium, cobalt, nickel, copper and rare earths – much more important to the economy. In this paper, I measure the ‘critical mineral risk' associated with clean energy at the firm level across 92 countries in the period since 2010. Using the text of earning calls, I derive measures of mineral-related exposure, ‘input uncertainty' and market sentiment, along with measures of firm mitigation strategies for dealing with risks. Between 2016-2022, the number of listed firms exposed to critical minerals increased by 2 to 6 times depending on the type of commodity. Exposure is also idiosyncratic to firms rather than being clustered in specific sectors and industries. The impact of critical mineral concerns on firms then operates along two channels. Firstly, the second-moment channel of input uncertainty reveals that an increase by one standard deviation in lithium risk and copper risk is respectively associated with a decrease in revenue growth for EU and US firms by 0.75 and 0.53 percentage points. However, this effect is dominated by effects from a first-moment sentiment channel related to technological expectations that are apparent for a broader set of minerals and firms. This dominance of positive sentiment over second-moment risk concerns is further reinforced by strong evidence of risk mitigation strategies being employed by firms.


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