Glencore shareholders demand more clarity on coal plans

Glencore’s direct and indirect emissions in 2021 amounted to 280 million tonnes of carbon dioxide equivalent — a similar level to Spain’s. Copyright 2022 The Associated Press. All Rights Reserved

Glencore investors have moved to force greater disclosure on its coal production plans, as the world’s most profitable miner of the fossil fuel faces questions over its climate impact.

A group of shareholders including Legal & General Investment Management and HSBC Asset Management has filed a resolution calling for detail on the matter, which will go to vote at Glencore’s annual meeting in May.

The resolution asks for “disclosure of how the company’s projected thermal coal production aligns with the Paris agreement’s objective . . . to limit the global temperature increase to 1.5C”, and requests information about capital expenditure on coal mines.

Glencore is the world’s most profitable listed miner of thermal coal. However, it has adopted climate targets that will eventually curb its coal operations.

Dror Elkayam, global ESG analyst at LGIM, which holds about 1.5% of Glencore’s outstanding shares, said the resolution was important to help investors assess risk.

“We want to really be able to look under the hood, and evaluate how the company is positioned in the low-carbon environment,” said Elkayam. “We believe there is not sufficient evidence that Glencore’s thermal coal production plans are aligned with the goals of the Paris agreement,” he added.

Glencore’s coal division was extremely profitable last year — contributing $8.9 billion (CHF8.25 billion) to company earnings during the first half alone, and helping send shareholder returns to a record high.

As the energy crisis triggered by Russia’s invasion of Ukraine drove prices to record highs, Glencore’s coal business thrived because it produces the type of high-quality thermal coal used in European power stations.

But shareholders have raised questions over how the coal business fits in with its climate plans, which include goals to cut direct and indirect emissions by 50% against 2019 levels by 2035.

Shareholders backing the new resolution have a collective $2.2 trillion under management and include LGIM, HSBC, Vision Super and the Swiss-based Ethos Foundation, representing pension funds Pensionskasse Post and Bernische Pensionskasse.

“It is so disappointing to see Glencore continuing to invest in thermal coal,” said Michael Wyrsch, chief investment officer at Vision Super, an Australian superannuation fund. He added that Glencore was also “well placed” with exposure to commodities that are key for the energy transition, such as copper and nickel.

Glencore expects to produce about 110 million tonnes of coal a year during the 2023-2025 period, similar to its level in 2022.

The company has said it will cap coal production at 150 million tonnes a year but has not laid out specific annual targets beyond 2025.

Concerns over Glencore’s coal production also flared up at its annual meeting last year, when nearly a quarter of shareholders voted against the company’s climate action plan.

That triggered a review, published in October, in which Glencore said it would publish more detail in its upcoming climate report in March.

Glencore’s direct and indirect emissions in 2021 amounted to 280 million tonnes of carbon dioxide equivalent — a similar level to Spain’s.

The company has a near-term goal to cut its direct and indirect emissions by 15% against 2019 levels by 2026 and reach net zero emissions by 2050.

“Glencore will publish its next Climate Progress Report in March, which will provide an update on our progress against our 2020 climate strategy,” the company said in a statement about the resolution, which was organised by the Australasian Centre for Corporate Responsibility and ShareAction, a UK charity.

Copyright The Financial Times Limited 2020