Glencore, the country’s biggest coal miner, is facing intensifying pressure over climate change as large shareholders call on the board to explain how pursuing new coal projects aligns with its commitments to arrest global warming.
Institutional investors managing a collective $3 trillion across Australia, Europe and the United States – including Legal & General, HSBC, Swiss pension funds and Melbourne-based Vision Super – have united for the first time to co-file a landmark climate resolution ahead of Glencore’s annual shareholder meeting.
Glencore operates 17 coal mines in NSW and Queensland producing thermal coal, which is burned to generate electricity, and metallurgical coal that supplies the global steel-making industry.
While the Swiss-based company has pledged to run down its thermal coal mines by the mid-2040s and achieve net-zero emissions by 2050, it has been proposing several projects to increase coal production in Australia, including expanding its Glendell coal mine in NSW, and possibly building a new mine in Queensland’s Surat Basin.
The investor-backed resolution, prepared by the Australasian Centre for Corporate Responsibility and responsible investing group ShareAction, demands Glencore provide greater disclosure about how its ongoing expenditure on thermal coal aligns with its pledge to uphold the Paris Agreement’s goal of averting catastrophic climate change by capping temperature rises at 1.5 degrees above pre-industrial levels.
It also calls for Glencore to outline any “inconsistency” between the miner’s growth ambitions and the International Energy Agency’s modelling from last year, which found that unabated coal power plants must be phased out by 2040 if the world is to achieve “net-zero” emissions by mid-century.
Legal & General, the UK’s largest investment manager for corporate pension schemes, said the ability to assess and evaluate companies’ exposure to financial risks stemming from the energy transition was “vital” for long-term investors.
“Having both invested in and engaged with Glencore over many years, a higher degree of transparency is necessary in order to clarify how the company’s exposure to thermal coal is aligned with the 1.5-degree pathway and corresponds to its net-zero commitment,” said Dror Elkayam, the group’s environmental, social and governance analyst.
The $12 billion Australian superannuation fund Vision Super said Glencore’s continued investment in coal “does not reconcile” with its public commitment to the Paris Agreement. Chief investment officer Michael Wyrsch said Glencore was well-placed to benefit from the accelerating shift to clean energy because of its exposure to copper and nickel – two raw materials that will be increasingly needed to build electric cars and renewables.
“That’s why it is so disappointing to see Glencore continuing to invest in thermal coal, which is a contracting industry,” he said.
The investors’ demands on Glencore are the latest sign of financial institutions seeking to pressure big polluters to better align their businesses with the goals of the Paris Agreement in a bid to minimise their financial and ethical exposure to risks caused by contributing to global warming.
In a statement, a Glencore spokesperson said the company would publish its next climate report in March, which would “provide an update on our progress against our 2020 climate strategy”.
As the fallout from Russia’s invasion of Ukraine drives buyers away from Russian coal, oil and gas and deepens a global energy shortage, coal this year overtook iron ore to become Australia’s single most lucrative export commodity. The fossil fuel is forecast to account for $132 billion in export earnings in 2022-23 as prices remain elevated at near-record levels, driving stunning increases in profits across the sector.
However, the longer-term outlook for Australia’s coal industry remains deeply uncertain and will depend largely on how aggressively countries seek to decarbonise by shifting to cleaner sources of energy.
If the world meets the Paris Agreement’s ultimate aim of 1.5 degrees – the level scientists say is necessary to avoid the most catastrophic effects of climate change – Australia’s coal earnings could collapse by up to 80 per cent by 2050, according to the Reserve Bank.
Many mining giants other than Glencore are increasingly divesting or announcing closures of their coal assets, while a growing number of banks, insurers and shareholders are pledging not to make new investments in the sector. Glencore, rather, has sought to position itself as a responsible owner of coal mines, promising to manage the assets’ decline instead of “making them someone else’s problem” or selling them to new buyers that may choose to expand output.
Naomi Hogan, strategic projects lead at the Australasian Centre for Corporate Responsibility, said Glencore’s decision late last year to withdraw an application for its large new Valeria coal mine in Queensland showed that the company was “capable of responding to investor concerns and to the global headwinds against new coal”.
Hogan said the climate resolution provided “additional momentum” for Glencore to keep acting and take steps to align its coal production with the goals of the Paris Agreement.
“Climate disruption and transition risks are already biting, and investors expect Glencore to be upfront about the level of exposure to thermal coal from now until 2035,” she said. “If Glencore truly seeks to have a Paris-aligned coal run-down strategy, then this resolution is the catalyst for the company to clearly disclose to investors precisely what that strategy involves and how it will be managed.”
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Source: Thanks smh.com