Following successful engagement with Climate Action 100+ signatories, miner Glencore has committed to aligning its business and investments with the goals of the Paris Agreement. Climate Action 100+ has welcomed Glencore's commitment and flagged that it will now look to other companies to follow suit.

Key takeouts

Glencore recently announced its decision to cap coal production at current levels and to prioritise investment in commodities supporting low-emissions technology following engagement with global lobby group Climate Action 100+ signatory investors

Climate Action 100+ will reportedly target 12 Australian companies following its successful campaign at Glencore

Reportedly, Climate Action 100+ is not seeking coal mine closures and/or divestment, but rather will make 'reasonable asks' of companies in the best long-term interests of investors

Glencore will align its business and investments with the goals of the Paris agreement

Glencore PLC has issued a statement strengthening its commitment to combatting climate change following engagement with lobby group, Climate Action 100+ signatories (The Church Commissioners for England, Investec Asset Management and Kempen).

Among other things, Glencore has committed to:

  • capping coal production at current levels;
  • prioritising investment in commodities supporting low-emissions technology
  • reiterated that it will continue to disclose the metrics, targets and scenarios used to assess and manage relevant climate-related risks and opportunities in alignment with the Taskforce on Climate-related Financial Disclosures (TCFD) recommendations
  • committed to reviewing its trade association memberships to ensure they are consistent with its climate stance. Glencore has also said it will publicly disclose the result of the review including any material misalignments identified and actions that will be taken.

'To deliver a strong investment case to our shareholders, we must invest in assets that will be resilient to regulatory, physical and operational risks related to climate change. To meet the growing needs of a lower carbon economy, Glencore aims to prioritise its capital investment to grow production of commodities essential to the energy and mobility transition and to limit its coal production capacity broadly to current levels' Glencore states.

Tipping point? Will other companies follow suit?

Climate Action 100+ has welcomed Glencore's statement suggesting that it may be the beginning of a broader shift in approach. Fiona Reynolds, a member of the global Climate Action100+ Steering Committee and CEO, the Principles for Responsible Investment (PRI) said 'We welcome this announcement from Glencore and think it will send a powerful signal to other companies about aligning their businesses to the Paris Agreement. It also demonstrates the success of investor engagement. Both corporates and investors need to act now and with urgency on climate action'.

Emma Herd, a member of the global Climate Action 100+ Steering Committee and Chief Executive Officer of the Investor Group on Climate Change (Australia/New Zealand) said that Glencore's announcement represents 'a significant step for the mining sector with potentially wide-reaching implications' adding that 'Investors will now be looking for more companies in the sector to align their business decisions with the Paris Agreement'.

Glencore's announcement has received wide media attention

  • A 'major reversal'? The WSJ describes it as a 'major reversal' for the company given its investment in recent years in coal, and for the CEO Ivan Glasenberg who has championed that investment. The WSJ notes that Glencore is the latest company to agree to the investor climate demands to date, but suggests that 'many more are likely to follow as companies prepare for their annual meetings of shareholders in the coming months'.
  • A matter of 'value over volume'? The AFR reports that analysts are sceptical of Glencore's motives suggesting that the company stands to benefit commercially from the production limits. Capping coal production was significant because prices could remain high amid tighter supplies. 'Glencore is chasing value over volume' Wood Mackenzie research director Prakash Sharma is quoted as saying. Australian companies on notice? Climate Action 100+ is reportedly planning to target 12 Australian companies

Other companies to be similarly targeted

  • Shareholder resolution at BP: Climate Action 100+ signatory investors have proposed what they describe as a 'far-reaching shareholder resolution' at BP committing the company to working to a business strategy consistent with the goals of the Paris Agreement. Significantly, BP’s Board of Directors is recommending its shareholders support the resolution. Mindy Lubber, Climate Action 100+ global Steering Committee vice chair, and Ceres CEO and President said 'We are encouraged that BP will take this positive step to align its business strategy with the goals of the Paris Agreement. Going forward, investors will expect full and transparent disclosure, and will hold the board and company executives accountable for BP’s progress against this critical commitment'.
  • Australian companies to be targeted? The AFR reports that Climate Action 100+ (which includes Australian Super as a signatory) has said it plans to target BHP and Rio Tinto over carbon emissions, following their successful campaign at Glencore. In addition, the group will reportedly target ten other Australian companies: Adelaide Brighton Ltd, AGL Energy Limited, Boral Limited, Qantas Airways Limited, Santos Limited, South32 Limited, Woodside Petroleum Ltd, Woolworths Group Limited, Bluescope Steel Limited and Origin Energy.
  • Not looking for coal mine closures? The AFR quotes Australian Super senior manager of investment governance David Gray as saying that coal mine closures and divestment were not an objective of Climate Action 100+ engagement activity. Rather, he said that the group wants to engage with companies so it can make 'reasonable asks' about climate change risk in the best long-term interests of members. Mr Gray went on to say that the group is preparing reports on each of the 12 companies.

[Sources: Climate Action 100+ media release 20/02/2019; 01/02/2019; Glencore media release 20/02/2019; [registration required] The WSJ 20/02/2019; [registration required] The AFR 21/02/2019; 21/02/2019; 24/02/2019]