Two of Europe's leading energy transition investors plan to raise 500 million euros ($544.55 million) for a battery raw material fund, aiming to plug "significant gaps" in the region's supply chain, executives told Reuters.
InnoEnergy, backed by the European Union, and Demeter Investment Managers said the EBA Strategic Battery Materials Fund would focus its efforts on critical minerals including lithium, nickel, cobalt, manganese and graphite.
Amid surging demand for electric batteries for transport and industry, the bloc is seeking to reduce its reliance on foreign supplies as part of the EU's Critical Raw Materials Act.
As the manager of the EU-backed European Battery Alliance, InnoEnergy aims to create a complete domestic battery value chain to boost the bloc's sovereignty.
"Any value chain is as strong as the weakest of its links and today the weakest of the links is the upstream, including mining to recycling, and where 90% of current supply comes from China," said Diego Pavia, chief executive of InnoEnergy, who was attending the World Economic Forum in Davos, Switzerland.
Commission Executive Vice-President Maros Sefcovic said in a statement that the battery industry was of "strategic importance and a key battleground for global competitiveness," adding securing raw materials was "the single biggest task ahead."
Over time, the aim is to secure 40%-50% of the necessary supply through projects that will ultimately cost around 7 billion or 8 billion euros but which may prove slow to get off the ground without the willingness of the fund to take developmental risks.
"We are solving the risky phases," Pavia said.
Established in 2010 and backed by 35 corporate and financial investors, InnoEnergy has so far invested its balance sheet in 200 companies with a combined 110 billion euros in revenue, including battery makers Northvolt and Verkor.
Once the money is raised, Demeter, which manages 1.3 billion euros and has invested in 230 companies and projects over 17 years, will act as investment manager while InnoEnergy will help identify and support potential projects.
At least 70% of the investments made by the fund will be in projects aimed at boosting domestic production from mining, processing, refining and recycling, with the rest in countries such as Canada, Namibia and Argentina.
One key focus of the fund will be to find more environmentally friendly ways of extracting and treating the raw materials, such that it can be classed as an Article 8 fund under the EU's Sustainable Finance Disclosure Regulation.
Antoine Troesch, managing partner at Demeter, said new techniques being developed were "less intrusive" to the environment. "This is where we want to be quite different."