Extracting 1 tonne of lithium uses 500,000 gallons of water¹. So, one car battery requires approximately 6,000 gallons of water.

Lithium extraction methods also use chemicals which are hazardous to aquatic life and water quality. They ultimately affect communities and their water supplies as they cause air and soil pollution.

In addition, if not properly recycled, rechargeable batteries contaminate groundwater, soil and air.

Given these contamination risks and the expected growth in battery demand due to electrification trends, recycling can offer great benefits.

Shareholders, direct investors and creditors of companies involved in the EV supply chain can help adopt a circular economy approach to sustainability by doing the following things:

• Research and establish best practices in lithium supply chains through ESG analysis of operating companies and industry best practices.
• Encourage research and development to spur technological innovations in reuse, recycling and disposal.
• Adopt best practices in product stewardship programs and plans to phase out hazardous chemicals.
• Encourage target setting for reduction of harmful emissions. Key metrics to track can include GHG, NOx, Sox emissions and other effluents.
• Understand political and governance risks of the regions from which battery minerals are sourced.
• Integrate ESG performance of companies into investment analysis and financial models (e.g. through a discount rate for ESG laggards to account for potential higher operational costs, fines or litigation costs that may arise from negative environmental and community impacts).
• Regularly engage with companies to better understand their practices, targets, performance metrics and future plans about minimizing environmental and social impacts. Engagement also helps to better understand companies' research and development plans about identifying more sustainable and viable options and technologies.

• Integrate ESG factors into project planning and development - e.g. initial impact assessments as well as free and prior informed consent.
• Conduct regular environmental and social impact assessments, including ongoing effects on biodiversity and community resources.
• Establish operational best practices and performance reporting on sector/business-relevant ESG issues, such as waste management, air emissions (including carbon emissions from transportation), health and safety practices and performance, ESG accountabilities in executive compensation, and skills diversity at board level
• Deeply understand ESG risks in their supply chains.

By engaging with companies on issues and metrics that ensure a holistic view of a company's ESG performance, investors can help mitigate ESG bubbles created by specific themes and contribute to a socially and environmentally just transition towards a net-zero economy.

¹https://www.barrons.com/articles/new-risk-tesla-other-electric-vehicle-makers-lithium-supply-batteries-51601498472

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