‘Peak’ phosphorus? The implications of phosphate scarcity for sustainable investors

Abstract

Inorganic phosphate-based fertilisers have done much to alleviate the grave problem of global hunger, yet these gains have also come at the expense of a critical dependence on a finite mineral resource. According to various projections, current economic global reserves of phosphate rock, approximately 90% of which is used to manufacture chemical fertilisers, are diminishing and will be depleted within as few as 40–150 years – a phenomenon commonly known as peak phosphorus. This article argues that much like the idea of peak oil before it, the peak phosphorus claim tends not to distinguish between long-term concerns about one day ‘running out’ of phosphate rock and the more immediate, multi-dimensional socio-economic causes and effects of poor resource management. The article shows the importance of a more nuanced understanding of the problem of resource scarcity to the sustainable investing agenda. In particular, the concentration of the majority of remaining global phosphate reserves in a handful of geopolitically sensitive countries and state-capitalist corporations presents a number of unexplored challenges to investors.

Keywords:

• peak phosphorus
• natural resource scarcity
• sustainable investing
• resource geopolitics
• state capitalism

Acknowledgements

I would like to thank Gordon Clark, Heather Hachigian, Andrew Barry, Dariusz Wójcik, and two anonymous referees for helpful comments on various drafts of this article. I have also benefited greatly from participating in Project Telos, a collaboration on sustainable investing research between Towers Watson and the University of Oxford. Any errors or omissions are my own.

Notes

This paper borrows Clark et al.’s (2012, 5) definition of ‘sustainable investing’: ‘long-term investing which is efficient and inter-generationally sound’.

However, in July 2011 the Chicago Mercantile Exchange (CME) began offering diammonium phosphate (DAP) fertilizer futures contracts.

One point often glossed over by peak phosphorus proponents is that phosphorus has a less direct relation to consumer markets than does oil: for example, Cohen et al. (2011) estimate that rising fertilizer and energy prices combined accounted for about 15% of the food price spike of 2008.

In addition to the pieces cited throughout this article, see e.g. Cummins (2009), Rosemarin, de Bruijne, and Caldwell (2009), Clabby (2010) and Schmundt (2010).

See phosphorusfutures.net and sustainablep.asu.edu, respectively.