Our updated approach for assessing mining company transition plans

Since we published our initial expectations for company transition plans in 2022, we have further developed our approach across sectors of the economy that are especially subject to climate-related risks and opportunities[1] and key to achieving net-zero emissions by 2050. This includes the mining and diversified metals sector since it produces both critical minerals for the transition, and materials subject to potential demand shifts within the transition.

Without the critical minerals that mining companies produce, the transition will not happen. As such, it’s essential that long-term, responsible investors, such as LGIM, support these companies as they decarbonise. In order for us to do so, however, they must meet our minimum expectations, included within our updated assessment framework. Companies that put transition plans to a vote which do not meet our expectations will not receive our support.

How can mining companies demonstrate robust, credible and 1.5°C-aligned transition plans?

Our assessment framework builds on existing literature[2] and includes metrics[3] categorised by the following themes:

1. Decarbonisation Strategy: Covers 1.5°C-aligned operational emission targets, methane from coal mining and neutralising measures.
2. Funding Allocation Disclosure of committed decarbonisation investment with quantitatively detailed components and linked to emissions reductions.
3. Emissions Disclosure: Covering scopes 1, 2 and 3.
4. Scope 3: Assessed according to commodity and category[4], including metallurgical and thermal coal, which builds upon our existing Coal Policy.
5. Just Transition: Covers planning for mine closures and respecting the internationally recognised human rights of Indigenous Peoples.
6. Lobbying: Disclosures of climate related lobbying activities[5], including trade association memberships, and the actions taken if these are not aligned with 1.5°C.
7. Governance: Board oversight of climate-related risks and opportunities, inclusion of robust sustainability targets in executive remuneration and sufficient level of relevant expertise and competency.
8. Sustainability Disclosures: Covering alignment with TCFD, ISSB and TNFD disclosure frameworks.

Given their pressing and complex nature, it’s important to explain why we are seeking specific disclosures related to methane from coal mining and scope 3 (category 10) emissions.

Methane from coal mining

Methane is a powerful greenhouse gas. Over a 20-year period, it is 80 times more potent at warming than carbon dioxide[6]. Ahead of COP28, the IEA noted that methane emissions from fossil fuels need to decrease by 75% by 2030 to keep a 1.5°C scenario in reach[7].

Coal seams naturally contain methane which can be released during or after mining operations[8]. Additionally, there are concerns that reported coal mine methane emissions may be underestimates[9] [10].

Currently, methane abatement opportunities are not well understood and therefore not being widely pursued by coal mining companies. However, to mitigate climate change and transition risk, we expect responsible mining operators to disclose their total methane emissions, commit to increase the coverage and quality of methane measurement and reporting, set targets to reduce their methane emissions, and disclose a credible strategy to meet those targets.

We welcomed the commitment from Anglo American to improve its methane emissions at its AGM this year, and hope that peers follow its example.

Addressing scope 3 (category 10) emissions

 Scope 3 emissions are those associated with indirect emissions across a company’s value chain. They are separated into 15 categories[11] and account for the majority of emissions across the mining and metal sector[12]. The framework includes metrics related to scope 3 on a category and commodity basis.

Scope 3 category 10 represents the majority of scope 3 emissions for many mining companies. It refers to the processing of sold products, which reflects the processing of iron ore using metallurgical coal in the steelmaking process and/or the processing of bauxite and alumina.

 Although we recognise the importance of targets for scope 3 category 10 emissions, within our assessment framework we have emphasised the importance of quantifiable disclosures regarding the actions and investments companies are making to decarbonise their downstream value chain.

We welcomed Rio Tinto’s commitment to enhance these disclosures this year.

Next steps

We plan to utilise this framework within our engagements. Companies wishing to find out more can do so by reaching out to the Investment Stewardship Team directly.

Key risks:

The value of an investment and any income taken from it is not guaranteed and can go down as well as up, you may not get back the amount you originally invested. It should be noted that diversification is no guarantee against a loss in a declining market. For illustrative purposes only. Reference to a particular security is on a historic basis and does not mean that the security is currently held or will be held within an LGIM portfolio. The above information does not constitute a recommendation to buy or sell any security. Assumptions, opinions and estimates are provided for illustrative purposes only. There is no guarantee that any forecasts made will come to pass.

[1] Our oil & gas sector principles: disclosure, commitments, and credibility, LGIM, May 2024.

[2] Including that of the TPT Disclosure Framework and Sector-specific Guidance, ICMM Scope 3 Reporting & Target Setting Guidance and the CA100+ Net Zero Sector Standard.

[3] Although the framework focuses currently focuses primarily on climate, we hope to incorporate more developed expectations on elements such as human rights in the near future.

[4] As defined by the GHG Protocol and aligned with ICMM Guidance.

[5] Including climate-advocacy. For more information, please refer to our blogs outlining our expectations on climate-related lobbying, and our engagement on the topic with Nippon Steel.

[6] Methane emissions are driving climate change. Here’s how to reduce them, UNEP, August 2021

[7] What does COP28 need to do to keep 1.5 °C within reach? These are the IEA's five criteria for success, IEA, November 2023,

[8] Driving Down Coal Methane Emissions, IEA, February 2023

[9] Global Methane Tracker 2024, IEA, March 2024

[10] Gross under-reporting of fugitive methane emissions has big implications for industry, IEEFA, July 2023

[11] Greenhouse Gas Protocol Technical Guidance for Calculating Scope 3 Emissions

[12] Material and Resource Requirements for the Energy Transition, ETC, July 2023, p.90