Green finance is built on a promise: that capital can be redirected to support the transition to a low-carbon economy while avoiding the environmental mistakes of the past. That promise is getting harder to keep.

The technologies needed for decarbonisation of electric vehicles, wind turbines, batteries and grid infrastructure rely on large quantities of critical minerals. Extracting those materials, even from remote places such as Greenland, remains environmentally disruptive, socially contested and politically fraught.

Sustainable finance shapes investment decisions across energy, infrastructure and manufacturing. The ethical frameworks this finance is based on often assume that environmental harm can be minimised through better disclosure, cleaner technologies and improved governance.

The extraction of critical minerals challenges that assumption. Mining is land intensive, energy hungry and often polluting. Recycling of existing batteries, electronics and turbines, and substitution away from scarce materials can reduce demand.

But most projections from the world’s energy watchdog, the International Energy Agency, show that demand for critical minerals will rise sharply under clean energy transitions . Similar bodies show that extraction of raw materials such as lithium, cobalt, nickel and rare earth elements will rise sharply over the next two decades.

This is because the transition away from fossil fuels depends on large volumes of new infrastructure including electric vehicle batteries, wind turbines and grid storage, which cannot be supplied from recycled materials alone.

Recent research and policy assessments suggest this contradiction is becoming more acute, not less. Recent analyses of critical mineral supply chains show that extraction and processing remain highly concentrated in a few countries particularly China, Australia, Chile and the Democratic Republic of Congo.

These supply chains are environmentally intensive, involving significant land use, water consumption and pollution. These supply chains are slow to scale because it takes years to obtain permits for new mines, requires large upfront investment, and depends on the construction of extensive infrastructure. Yet global climate targets assume rapid expansion of clean-energy technologies.

In Greenland, environmental regulation and local political decisions have delayed or halted mining projects that are often considered key to the green transition.

Greenland is geologically rich. The island is home to significant deposits of rare earth elements, graphite, zinc and other minerals considered critical by both the EU and the US. These materials are central to clean-energy supply chains and have become strategically important as governments seek to reduce dependence on China, a superpower which dominates global processing capacity.

At the same time, Greenland’s environment is exceptionally fragile. Arctic ecosystems recover slowly from industrial disruption, infrastructure is limited and mining projects face high logistical and financial costs. These constraints have already shaped political choices.

In 2021, Greenland’s government introduced restrictions on uranium mining, effectively blocking the development of the large Kvanefjeld rare earth project. That decision reflected environmental and social priorities. It also highlighted the economic and legal pressures that arise when sustainability policies collide with global demand for transition minerals.

When green finance meets geopolitics

In a world of geopolitical competition, governments are increasingly treating access to critical minerals as a matter of national security as well as climate policy. Policy statements and strategy documents from the US, the EU and other major economies now frame mineral supply not just as an environmental issue, but as essential to economic resilience, defence capability and technological leadership.

This shift has encouraged public financial support, diplomatic engagement and strategic partnerships aimed at securing future supply, including increased foreign interest in Greenland’s mineral sector. While Greenland retains control over its resources, international attention reflects the growing geopolitical importance of potential new supply sources.

Projects justified as supporting the energy transition may be driven as much by geopolitical urgency as by environmental benefit. Academic research on critical mineral supply chains shows that when geopolitical and industrial priorities shape governance frameworks, local environmental risks and community consent are often marginalised in favour of strategic and economic goals

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Tension in Greenland

Despite international interest, large-scale mining in Greenland has not taken off. Environmental safeguards, political opposition, infrastructure gaps and high costs have slowed development. This reality complicates the assumption that new mineral frontiers can quickly solve clean-energy supply bottlenecks through investment alone.

For investors, Greenland raises difficult questions about how environmental, social and governance (ESG) standards apply to transition minerals. Financing a rare earth mine may reduce long-term emissions by enabling renewable technologies, yet still impose immediate environmental damage. Standard ESG metrics struggle to capture this trade-off. They are better suited to assessing corporate behaviour than to resolving conflicts between global climate goals and local environmental harm.

Current geopolitical dynamics have huge consequences for Greenland’s environment. Kedardome/Shutterstock

In Greenland, the debate over “green mining” (the idea that mineral extraction can be made environmentally acceptable through cleaner technologies, higher standards and better governance) is not a case of poor regulation or weak oversight. Instead, it reflects a jurisdiction that has deliberately placed environmental limits on extraction, even as it faces economic and strategic pressure as a result.

As governments continue to pursue ambitious climate targets under national and international commitments, similar dilemmas will emerge elsewhere. Green finance cannot avoid the material foundations of the energy transition.

Sustainable finance frameworks must evolve to handle situations where environmental protection constrains access to strategically important resources. Greenland shows how protecting the environment can clash with efforts to secure the minerals needed for the energy transition, and that this tension is far from resolved.

Without clearer rules on how to balance climate benefits against local ecological costs and without genuine respect for sovereignty and community choice, green finance risks becoming reactive, stretched between environmental principles and geopolitical realities.

The transition to a low-carbon economy requires minerals. But Greenland highlights that how those minerals are sourced and who bears the environmental cost remains unresolved.

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