The ESG Blind Spot: Why Central Africa’s Conflict Minerals Matter for Prosper Social Finance
Introduction
As a student-led ESG investment fund, Prosper Social Finance must scrutinize the ethical risks within its portfolio equities’ supply chains. While Prosper primarily invests in developed markets, many of its holdings—particularly in technology, semiconductors, and clean energy—are indirectly reliant on critical minerals sourced from high-risk regions, particularly the Democratic Republic of Congo (DRC).
Cobalt, coltan (processed tantalum), tin, and tungsten are essential for electric vehicles, semiconductors, and renewable energy infrastructure. The DRC has been fraught with conflict for over 30 years, with more than 200 rebel groups vying for dominance over mineral-rich territories (1). Once in control, militia groups impose forced labor, child exploitation, and violent extortion on workers (4).
Efforts to regulate final good supply chains, such as the U.S. Dodd-Frank Act and the EU Conflict Minerals Regulation, have broadly failed to stop mineral revenue from funding militia operations. Large quantities of illicit minerals still enter global markets via false certifications, smuggling, and opaque refining processes.
For Prosper, this issue is directly relevant—many of its portfolio companies rely on these materials, exposing them to ethical, regulatory, and reputational risks. This report examines how conflict minerals continue to infiltrate supply chains, the paradox in certification schemes, and the steps ESG investors must take to drive meaningful change.
The Role of Armed Groups in the Conflict Mineral Economy
One of the most concerning recent developments has been the resurgence of M23, a Rwandan-backed rebel group that has rapidly expanded its territorial control in eastern DRC. In 2024-2025, M23 seized major mining areas, including Rubaya, which supplies 15% of the world’s tantalum (processed into coltan and used in smartphones and computers). According to the head of UN mission in Congo, the group is estimated to earn $300,000 per month from illicit mineral sales (1).
In January 2025, M23 seized Goma, the DRC’s third-largest city, further solidifying its power in the region (10). As the scale of mines under militia control grows, the flow of illicit minerals into global supply chains becomes harder to regulat . The international community has attempted to curb this trade through traceability programs and regulations, but measures have proved ineffective.
Regulatory Failures: Why Dodd-Frank and EU Laws Fall Short
The U.S. Dodd-Frank Act (2010, Section 1502) was intended to increase corporate transparency by requiring U.S.-listed companies to disclose whether their products contain minerals sourced from conflict zones (2). The idea was that reputational risk would pressure firms to voluntarily stop buying conflict minerals (5).
More recently, the EU’s Conflict Minerals Regulation (2021) introduced due diligence requirements ofr mineral importers. However, it does not cover end-users like technology and EV companies, leaving significant enforcement gaps (11).
Traceability Loopholes: How Illicit Minerals Continue to Enter Global Markets
Despite regulations, due diligence programs have failed, allowing conflict minerals to continue flowing through legal markets.
1. Fraudulent Certifications and Weak Oversight
The International Tin Supply Chain Initiative (ITSCI), the leading private certification program in the DRC, has faced heavy criticism. In 2023, Congolese authorities found large quantities of minerals fraudulently labeled as “responsibly sourced”, many of which were traced back to militia-controlled mines after being sold to international buyers (3). Additionally, reports found persistent child labor in privately certified mines, demonstrating that outsourcing these complex issues to the private sector has proven ineffective (3).
A 2024 study by Chicago Booth further revealed that when a mine is certified as conflict-free, probability of violence falls within a 25 km radius but increases 25-75 km away, suggesting conflict is simply relocated rather than resolved (9).
2. Smuggling Through Rwanda
Another major loophole is the smuggling network operating through Rwanda. As Rwanda is not officially classified as a conflict zone, illict minerals exported from the country bypass U.S. and EU regulations (7). These materials are then effectively laundered into the legal export market, allowing multinational companies to unknowingly purchase smuggled minerals, assuming they are conflict-free (7).
3. Refining Obscures the Source
Even when conflict minerals pass through formal export channels, their origins become impossible to trace once refined. After export, minerals are sent to smelters in Thailand and Malaysia, where they are processed alongside legally sourced materials (4). Smuggling networks, certification loopholes, and the opacity of refining processes continue to undermine attempts to regulate traceability.
The Burden on Artisanal Miners
Beyond regulatory failure, there is a critical economic paradox present in who the burden of compliance falls upon. In order to legally sell minerals, independent small-scale miners must pay for certification, but the cost is often prohibitively high (4). As a result, many are pushed out of legal markets and forced to sell through black-market buyers, where they receive lower wages and face even worse conditions (4).
This reveals a fundamental flaw in the current regulatory approach—while corporations continue to source minerals labeled as conflict-free, small-scale miners remain excluded from legal trade.
Corporate Complicity: Why Multinational Firms Avoid Accountability
Large multinational corporations face mounting scrutiny failing to prevent illicit minerals from entering their supply chains (6).
In December 2024, the DRC government filed criminal complaints against Apple in France and Belgium, accusing the company of sourcing conflict minerals laundered through international supply chains (7).
Just months prior, a U.S. court dismissed a lawsuit against Apple, Tesla, Alphabet (Google), and Dell, which accused them of knowingly benefiting from child labor in DRC cobalt mines (8). This ruling, which acknowledged supply chain risks but refused to hold companies liable, sets a troubling precedent, allowing corporations to distance themselves from abuses while continuing to profit from minerals extracted under exploitative conditions.
Without stronger enforcement and legal consequences, companies have no real incentive to change their practices.
The Way Forward for ESG Investors
Rather than relying on flawed policies, ESG investors must push for real reforms that address both traceability failures and the socio-economic realities of mining communities. This calls for more transparent supply chain tracking beyond the smelter stage, perhaps using blockchain technology. Regulations must also integrate small-scale miners into legal supply chains, not exclude them. Finally, instead of outsourcing enforcement, stricter state-led initiatives are needed.
ESG investors cannot afford to ignore these issues. Instead of divesting from high-risk regions, they must push for corporate accountability, stronger regulations, and a transparent supply chain framework that supports ethical sourcing without excluding vulnerable communities.
References
Associated Press. 2024. “M23 Gains Control Over Mining in Eastern DRC, UN Security Council Warns.” AP News, August 31, 2024. https://apnews.com/article/congo-mining-m23-un-security-council-b11207ba887b352d702c3e4603d0c891.
Le Monde. 2024. “DRC Marred by Blatant Failure in Coltan Traceability, Essential for Smartphones.” Le Monde Afrique, August 31, 2024. https://www.lemonde.fr/en/le-monde-africa/article/2024/08/31/drc-marred-by-blatant-failure-in-coltan-traceability-essential-for-smartphones_6724001_124.html.
Mongabay. 2022. “Scheme to Stop Conflict Minerals Fails to End Child Labor in DRC, Report Says.” Mongabay, May 2022. https://news.mongabay.com/2022/05/scheme-to-stop-conflict-minerals-fails-to-end-child-labor-in-drc-report-says/.
Pulitzer Center. 2024. “The Problem with ‘Conflict-Free’ Minerals.” Pulitzer Center, 2024. https://pulitzercenter.org/stories/problem-conflict-free-minerals.
Foreign Policy. 2024. “The Problem with ‘Conflict-Free’ Minerals: Traceability Schemes in the Congo.” Foreign Policy, May 22, 2024. https://foreignpolicy.com/2024/05/22/conflict-free-minerals-traceability-schemes-congo/.
The Guardian. 2025. “Campaigners Urge EU to Halt Imports of Conflict Minerals from the DRC.” The Guardian, January 15, 2025. https://www.theguardian.com/global-development/2025/jan/15/democratic-republic-congo-drc-eu-halt-imports-conflict-minerals-drc-campaigners-urge-eu.
Al Jazeera. 2024. “Why Has the DRC Filed Criminal Charges Against Apple Over Conflict Minerals?” Al Jazeera, December 20, 2024. https://www.aljazeera.com/news/2024/12/20/why-has-drc-filed-criminal-charges-against-apple-over-conflict-minerals.
ABC News. 2024. “US Court Absolves Top Tech Companies in Congo’s Child Labor Case.” ABC News, 2024. https://abcnews.go.com/International/us-court-absolves-top-tech-companies-congos-child/story?id=107839639.
Chicago Booth Review. 2024. “Why ‘Conflict-Free’ Gold Doesn’t Reduce Conflict.” Chicago Booth Review, 2024. https://www.chicagobooth.edu/review/why-conflict-free-gold-doesnt-reduce-conflict.
Reuters. 2025. “Congo Rebel Gains Boost Illicit Mineral Trade Through Rwanda, Analysts Say.” Reuters, January 28, 2025. https://www.reuters.com/world/africa/congo-rebel-gains-boost-illicit-mineral-trade-through-rwanda-analysts-say-2025-01-28/.
Amnesty International. 2024. “DRC: Urgent EU Action Needed in Response to Human Rights Crisis in Eastern DRC.” Amnesty International, 2024. https://www.amnesty.eu/news/drc-urgent-eu-action-needed-in-response-to-human-rights-crisis-in-eastern-drc/.