Glencore facing investor questioning over coal development and net-zero plans

The resolution from the investors will be presented and voted on at Glencore's annual shareholder meeting in 2023

A group of more than 60 investors has written to Swiss multinational mining and materials giant Glencore, calling for evidence that thermal coal production is in alignment with the firm’s climate goals.

Proposals from around 70 investors, which manage a combined $2.2trn in assets, were developed by the NGO ShareAction alongside the Australasian Centre for Corporate Responsibility (ACCR). Investors include HSBC Asset Management and Legal and General Investment Management (LGIM).

Glencore set a net-zero target for 2050 back in 2020 but did not include measures to divest away from coal production. Indeed, thermal coal accounts for 90% of the company’s annual coal production, which is the largest source of emissions.

The company has also benefited from the spike in energy prices, with its fossil fuel commodities creating around $10bn in earnings in the six months up to June last year.

Investors are calling on the company to explain how current production levels are compatible with a net-zero trajectory.

“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 1.5C pathway and corresponds to its net zero commitment,” LGIM’s ESG analyst Dror Elkayam said.

According to the International Energy Agency (IEA), thermal coal is one of the highest-emitting energy sources and accounts for almost half of the global energy supplies. Under the Agency’s own net-zero scenarios, demand for this source would need to fall by more than 65% between now and 2030.

The resolution from the investors will be presented and voted on at Glencore’s annual shareholder meeting in 2023. A statement from the firm said that it’s latest Climate Progress Report would be issued in March which would “provide an update” on its net-zero strategy.

Net-zero strategy

In 2020, the mining company announced a net-zero target for 2050, covering all scopes.

The company’s ‘Pathway to Net-Zero’ framework includes an interim target to reduce absolute emissions across all scopes by 40% by 2035, against a 2019 baseline.

Glencore’s plans for meeting the 2035 and 2050 targets are centred around seven pillars, including reducing Scope 1 (direct) emissions through investments in energy efficiency, resource efficiency and recycled materials and reducing Scope 2 (power-related) emissions through electrification, renewable electricity and low-carbon heat.

But Scope 3 (indirect) emissions are a large focus. Like most companies in the sector, this is where the majority of Glencore’s climate impact lies. The company has said it will reduce coal production and increase the production of what it calls “transition” metals – the materials commonly used in technologies like electric vehicles (EVs) and large-scale battery storage arrays.

Glencore’s plans for addressing Scope 3 emissions also cover engaging with customers and policymakers to increase the demand for low-carbon metal; and training supply chain workers to use low-carbon technologies. On the latter, Glencore’s plans mention abatement. The firm is expected to invest in both man-made carbon capture and in nature-based solutions, whether through insetting or offsetting.

It justified a decision to remain in the coal market, rather than to divest entirely, by emphasising the possibility of engagement.