This article has been prepared to introduce the topic of conflict. 

Here, we provide a few initial thoughts, but conflict is complex and emotive, and we cannot do conflict justice in a short, accessible article. We believe it’s a topic that deserves deeper thought and longer conversation. For investors that are reading this, and want to discuss further, please get in touch.

As a topic, conflict is not well-covered by investors.

There are a few reasons.

  • The complexity of conflict (there are few parallels between, for example, conflict in Gaza and conflict in Myanmar).
  • Investors’ limited agency (it is an issue beyond our control).
  • Our inability to measure the effects of conflict (we do not believe traditional company analysis or ESG ratings adequately consider conflict, we explain our views in more detail below).
  • And, perhaps, the enormity of conflict, and the disconnect between portfolio management and the consequences of conflict.

Given the breadth of sustainability issues, conflict may seem like an issue low on investors’ priority lists. Conflict, however, dominates our news feeds, and peace, in many regions across the world, feels fragile. 

As we turn our attention to energy transition, the materials necessary to transition are often sourced from countries in conflict. Indeed, in some instances, price pressure in supply chains and supply chain governance, may be a contributor to instances of conflict (we share research on this below).

There are a range of actions we believe investors can take, which Canbury is well-placed to support, given Canbury’s advanced data and supply chain analysis tools, underpinned by the latest technologies, and the experience of our senior team – as well as our preparedness to take on complex topics where solutions are not easily forthcoming.

As part of this, we can support investors in training, policy development, data sets, portfolio analysis and engagement actions. We can also support investors in understanding and taking steps to contribute to the strength of international organisations, which, ultimately, is what’s necessary if we’re to address the causes of conflict.


Conflicts draw the attention of markets in times of crisis. To some extent, conflict is factored into company valuations, particularly those operating in areas prone to conflict or in areas of weak governance, supply chain analysis and international trade.

We’ve not yet seen the systematic inclusion of conflict in responsible investment beliefs and policies, nor the articulation of steps investors can and should take to understand, and where appropriate, take action, as well as measurement and reporting.

Given the relationship between conflict and environmental transition (a theme that is well-covered by investors), as well as the importance of conflict in its own right, we believe this is an oversight.

Conflict and energy transition

The Stockholm International Peace Research Institute (SIPRI) has published research on this topic: “Indicators of insecurity are rising, while indicators of environmental integrity are sinking. The mix is toxic, profound and damaging; and institutions with the power to find solutions, including governments, are waking up far too slowly.”

In short, environmental crises contribute to conflict, while conflict damages the environment.

Investment decision-making too often supports the economic activities that drive both environmental degradation and conflict – often in the same places – without understanding, measurement, nor attempts at mitigation.

Geopolitical security has always been connected to the fortunes of energy markets. As energy systems transition away from fossil fuels to clean energy, the dynamics of this coupling change but the fact of it remains.

Minerals like lithium, graphite and cobalt are critical to the energy transition, along with rare earth elements. We are unable to transition without these commodities, and our success in averting the worst scenarios of climate crisis depends upon increasing supplies of them.

The extraction of these commodities is linked with highly destructive environmental impacts. Markets for these resources are subject to similar volatility as other commodity markets, alongside similar risks of negative impacts on communities.

This is particularly acute due to the location of many reserves and mining operations in places characterised by fragile governance, fragile ecology, chronic insecurity and conflict, and high vulnerability, particularly for indigenous peoples.

Analysis of global value chains by the Extractive Industries Transparency Initiative (EITI) finds the rush for minerals is already contributing to tension, conflict and destruction in mineral-producing countries.

It also identifies significant governance risks emerging at all levels – subnational, national, transnational and global. Readouts from this year’s Davos meetings include talk of war-torn Ukraine becoming a key alternative supply source for critical materials for a Europe that feels overly dependent on China to source them.

Focus on Myanmar 

The current situation in Myanmar provides a brutal example of conflict and energy transition.

Myanmar has suffered the consequences of a conflict resource economy to varying degrees since the 1950s. State actors (including military and military-owned or -backed companies), Ethnic Armed Organisations (EAOs) and other militias have financed their leaders and activities through natural resource extraction and trade.

Commodities include illicit poppy production, oil and gas, minerals, gold and gemstones, jade, timber and agricultural products.

The demand for transition minerals has combined with the escalation of conflict up to and following the coup, and more recently, the imposition of rule by the military junta in 2021.

This has placed the people of Myanmar directly in the firing line.

Since environmental regulations were tightened in China in 2015, its imports of rare earth elements from neighbouring Myanmar have risen dramatically, from 300 tonnes in 2014 to 35,500 tonnes by 2020.

By 2021 China’s imports of heavy rare earth materials from Myanmar exceeded its own domestic production targets. There are few alternatives for sourcing elements like dysprosium and terbium and China is now heavily dependent on imports from Myanmar.

Public information on these supply chains is limited but investigations from groups including Global Witness reveal the scale of the operations and their devastating environmental impacts.

There is strong reason to believe revenues from illegal mining flow directly to those involved in the ongoing conflict. Companies are increasingly operating with high levels of impunity and are accused of land grabbing in addition to environmental devastation and unsafe working conditions.

Many companies have been accused by NGOs of propping up the military regime by directly or indirectly facilitating their access to arms, equipment or funding.

Investigations conducted by Inclusive Development International identify 344 ESG-labelled funds with $13.4bn of holdings in 33 companies with economic ties to the Myanmar military.

A number of companies in other sectors such as oil and gas and garment manufacturing have already undertaken or considered making a responsible exit from business relationships in Myanmar.

Recent military gains in Myanmar by resistance forces including EAOs and People’s Defence Forces (PDFs) have generated a range of speculation from some quarters that the military junta may be on the verge of defeat and that it is time to start planning for what comes next.

But experienced local and foreign Myanmar analysts have cautioned that it is far too soon to draw such conclusions. Neither side is in a position to achieve outright military victory and civilian suffering is likely to continue.

And Myanmar has been poorly served in the past by plans for peace and development that have been developed at distance by external actors.

ESG ratings and benchmarks alone are insufficient investors to manage near-term exposures and long-term strategy 

The current situation in Myanmar is but one of many examples of this destructive relationship between supply chains for critical minerals and the extreme environmental and human harm that often accompanies them.

The human and ecological cost of the mining of critical minerals from the Democratic Republic of Congo (DRC), the world’s largest producer of cobalt, has been widely recognised for at least a decade.

This is not an aberration, but an enduring characteristic of many natural resource markets.

In our experience, the company policies and practices that show up in wholesale data and analysis like many ESG ratings or benchmarks have comparatively little relevance.

They may highlight company or investment exposure at a general level or with respect to sporadic scandals, and provide an indication of the existence of relevant corporate sustainability or due diligence policies.

But this is far from sufficient to understand what is happening on the ground.

For investors with exposures to natural resource supply chains, it is vital to understand how portfolio companies engage in efforts to avoid contributing to the drivers of conflict.

This also applies to efforts in support of governmental and multi-stakeholder initiatives working to establish the conditions for peace, including responding to the priorities and needs of the people most affected.

In our view, addressing these questions requires:

  • Good corporate sustainability policies
  • Commitments to due diligence
  • Ratings or benchmarks that aggregate data on these.

But also:

  • Access to local data, including local language media and NGO analysis
  • Contextualised analysis.

The local data and analysis can enable assessments of exposure (in real-time – or at least, more current), and inform long-term investment and engagement strategies so investors can systematically avoid contributing to harm while supporting the conditions for improved security and environmental protections.

Finally, establishing safe, sustainable and resilient supply chains for critical minerals will depend on government leadership, including actions taken in domestic markets on issues such as traceability and import materials.

As the OECD has said: “if governments prioritise short-term access to resources at the expense of mitigating governance risks, it could worsen legal uncertainty, cycles of renegotiation and the often precarious investment climate faced by companies, transposing these risks to a much larger scale.”

What steps can investors take?

Map and assess exposure

  • Including geographic exposure (national and sub-national), sector and company assessment, and full supply chain mapping.
  • Identifying and prioritising both financial risks to portfolios and salient impacts on people and the environment.
  • Using a diverse set of data resources, including corporate disclosures, human rights benchmarks, open access data resources, multilateral and government reports, media and NGO reports, affected stakeholders, commercial data and research providers.

Undertake enhanced human rights and environmental due diligence

  • Consistent with responsibilities and requirements under the UNGPs and OECD Guidelines.
  • Comprising ‘enhanced due diligence’ in conflict-affected areas.
  • Including engagement with affected communities and workers.
  • Using conflict-sensitive approaches, addressing both direct impacts of business activity, and indirect impacts (including contribution to underlying conflict drivers and relationship with conflict actors).

Incorporate conflict assessment in investment strategy and decisions

  • Policy and governance – addressing principles for a just energy transition that respects human rights.
  • Screening and portfolio construction.
  • Targeted divestment or ending business relationships – disengagement is sometimes the right decision (e.g. where at risk of complicity in human rights abuses) but must be subject to careful considering as it can have negative consequences.
  • Engagement with companies and governments (public policy) – both to address existing harms or near-term risks, and to ensure polices and planning address long term solutions to reduce conflict and improve supply chain diversity and resilience.
  • Portfolio companies in exposed regions are likely to have more influence on the drivers of conflict than their shareholders. As such, investors can engage companies to use their influence in a responsible way, one which supports the conditions for peace.
  • Collaboration in investor and multistakeholder initiatives.


Canbury’s sustainability services:

At Canbury, we can support investors in understanding:

  • Your direct exposure to the risks associated with negative environmental and social impacts of commodities, including transition commodities
  • The risks that these negative environmental and social impacts pose to your long-term sustainability strategy
  • How your activities contribute to these impacts, directly or indirectly
  • Where conflict and insecurity are involved, how your activities contribute to the drivers of conflict or conditions for peace
  • The actions you can undertake to address these risks, specific to investment portfolios, and to at systemic level (see below).

Our support includes training, policy development, analysis, data sets and supply chain tools, as well as suggested actions and stewardship.

Resources on action:

Resources on due diligence:

Resources on toolkits:

Questions investment decision-makers should consider:

  • What is the availability of reliable and contextualised information and analysis?
  • What is the nature and duration of the conflict?
  • How are investments and economic activities connected to the conflict and affected by it?
  • Is this investment linked to adverse environmental, social or human rights impacts?
  • Is this investment contributing to the drivers of conflict (or parties to conflict)?
  • Is due diligence possible or effective?
  • Can this investment contribute to sustainable, just peace and prosperity?
  • If this is mission-critical (e.g. for the clean energy transition) then what can companies and investors, individually or collectively do to avoid harms and manage risks (investment or supply chain, idiosyncratic or market-wide/systemic)?

Investment initiatives:

How can investors find the answers:

Myanmar situation:

Data on critical minerals markets and sectors:

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