It’s true that mining assets don’t fit neatly in infrastructure portfolios. Their exposure to commodity prices as well as technology means their risk-return profile differs significantly. But while they’re not a natural fit for infrastructure they’re adjacent enough to have a significant impact on existing investments.

Consider that last year alone, nearly $500 billion of private capital was invested in energy transition projects, according to Standard & Poor’s Global Commodity Insights. What’s more, private capital funds have raised more than $200 billion between August 2022 and the end of last year with half that total having already been invested in renewable power generation.

While not all renewable technologies require rare earths or critical metals, wind turbines and batteries do. So, what kind of impact could a supply shortage in these critical materials have on energy transition investments? BloombergNEF’s head of metals and mining, Kwasi Ampofo, provides some context.

“Five years ago, the cost of raw materials relative to the total cost of a wind turbine was about 10 percent. Fast forward to last year, and that figure has reached 30 percent. So, if you are in a business where something that was just 10 percent of your opex has risen to 30 percent, you would ask yourself: ‘How do I solve this challenge?’”.

Governments are already trying to solve it through legislation. In the US there’s the Inflation Reduction Act and the CHIPS Act, for example, while in Europe there are several laws that are already in force or on the horizon.

Take the Critical Raw Materials Act, which the European Parliament adopted in December and is expected to come into force this year. It establishes a set of targets to be met by 2030 with the aim of diversifying EU supplies by extracting 10 percent of the critical raw materials the bloc needs, processing 40 percent of what is consumed domestically, while no more than 65 percent of the EU’s annual consumption should be sourced from a single third country.

There is also the new Battery Regulation the EU passed last year, whose objective is to ensure a sustainable battery lifecycle. As of 1 February 2027, all EV and industrial batteries over 2kWh sold into the EU market will require a unique battery passport that must contain information such as the battery’s carbon footprint, performance and durability, and supply chain due diligence.

Some infrastructure fund managers are also trying to help solve this challenge. One example is InfraVia Capital Partners, which last May launched its Critical Metals Fund targeting “projects that encompass the entire value chain, from extraction to processing to recycling”, it said at the time.

The firm is aiming to raise €2 billion for this new strategy and has secured €500 million from the government, under the France 2030 programme which supports the growth of companies in key industries, including sustainable development.

It is also government support as well as the right contractual structure that enabled Macquarie Asset Management and Meridiam – traditional infrastructure fund managers – to invest in French EV battery manufacturer Verkor’s gigafactory.

State-owned Bpifrance is backing 80 percent of the project’s financing, while Renault has come in as the anchor offtaker and is a minority shareholder in the French start-up. All of these factors are what made the project attractive for the likes of Macquarie and Meridiam, according to Thomas Herman, of counsel within Herbert Smith Freehills’ energy transition and infrastructure team, who is advising Renault on the deal.

His colleague, partner Helen Beatty, is seeing infrastructure investors interested in the space “provided it has the right investment structure and revenue protections”.

With governments incentivising infrastructure investors to get involved in the supply chain –  through subsidies and regulation – it’s now up to infrastructure managers to work out the right investment structure to help unlock the next phase of the energy transition.