Investors in Glencore have moved to force more disclosure about their coal production plans, as the world’s most profitable fossil fuel miner faces questions about its climate impact.
Shareholder groups including Legal & General Investment Management and HSBC Asset Management have tabled a resolution seeking details on the matter, which will be voted on at Glencore’s annual meeting in May.
The resolution calls for “disclosure of how the company’s thermal coal production projections align with the Paris agreement’s goals . . . to limit global temperature rise to 1.5C”, and requests information on capital spending on coal mines.
Glencore is the world’s most profitable thermal coal miner. Instead, it has adopted climate targets that will ultimately discourage coal operations.
Dror Elkayam, global ESG analyst at LGIM, which holds about 1.5 percent of Glencore’s outstanding shares, said the resolution was important to help investors assess risk.
“We really want to be able to look under the hood, and estimate how the company is positioned in a low carbon environment,” said Elkayam. “We believe there is insufficient evidence that Glencore’s thermal coal production plans are in line with the goals of the Paris agreement,” he said.
Glencore’s coal division was very profitable last year – contributing $8.9 billion to the company’s earnings in the first half, and helping to return record-high shareholder returns.
As the energy crisis triggered by Russia’s invasion of Ukraine has sent prices to record highs, Glencore’s coal business is booming as it produces the kind of high-quality thermal coal used in European power stations.
But shareholders have questioned how the coal business fits into the climate plan, which includes a goal to reduce direct and indirect emissions by 50 percent against 2019 levels by 2035.
Shareholders supporting the new resolution have a collective $2.2tn under management and include LGIM, HSBC, Vision Super and the Swiss-based Ethos Foundation, which represents the Pensionskasse Post and Bernische Pensionskasse pension funds.
“It’s disappointing to see Glencore continue to invest in thermal coal,” said Michael Wyrsch, chief investment officer at Vision Super, an Australian superannuation fund. He added that Glencore is also “well placed” with exposure to commodities that are key to the energy transition, such as copper and nickel.
Glencore expects to produce approximately 110 million tons of coal a year during the period 2023-2025, the same level as in 2022.
The company has said it will cap coal production at 150 million tons per year, but has not set specific annual targets beyond 2025.
Concerns about Glencore’s coal production also rose at last year’s annual meeting, when nearly a quarter of shareholders voted against the company’s climate action plan.
That triggered the review, published in October, which Glencore said it would publish in more detail in its next climate report in March.
Glencore’s direct and indirect emissions in 2021 will be 280 million tonnes of carbon dioxide equivalent – the same level as Spain.
The company has a short-term target of reducing direct and indirect emissions by 15 percent against 2019 levels by 2026 and achieving net zero emissions by 2050.
“Glencore will publish its next Climate Progress Report in March, which will provide an update on our progress against the 2020 climate strategy,” the company said in a statement on the resolution, which was organized by the Australasian Center for Corporate Responsibility and ShareAction, a UK charity.