Turning up the heat on Glencore’s coal production strategy

In 2021, Glencore* made a public commitment to align its targets and ambition with the goals of the Paris Agreement. However, it remains unclear how the company’s planned thermal coal production aligns with global demand for thermal coal under a 1.5°C scenario.

Therefore, LGIM has co-filed a shareholder proposal at Glencore’s 2023 AGM calling for disclosure on how the company’s thermal coal production plans and capital allocation decisions are aligned with the Paris objectives.

The proposal was filed together with Ethos Foundation on behalf of Pensionskasse Post and Bernische Pensionskasse, Vision Super, HSBC Asset Management, the Australasian Centre for Corporate Responsibility (ACCR) and ShareAction.

First-ever shareholder resolution to Glencore focusing on thermal coal

This proposal was filed as an organic escalation following our multi-year discussions with the company since 2016 on its approach to the energy transition. By filing this first-ever shareholder resolution to be submitted to Glencore on thermal coal, we are exercising our commitment as a large, responsible investor to hold companies to account on their approach to the energy transition.

In 2021, we publicly called on companies to propose a ‘Say on Climate’ vote, allowing shareholders to cast their verdict on the climate-transition plans proposed by management. A year later, we laid out LGIM’s criteria to support such plans, and committed to increase the pressure on companies that fail to put suitably ambitious and credible transition plans to a shareholder vote by filing shareholder resolutions, as we consider them to be a targeted tool to drive impact.

At the 2022 AGM, we voted against the company’s climate plan, which was subject to a significant level of shareholder dissent, with 24% of the shareholder vote cast against the plan. Some of our key concerns included the potential misalignment between the company’s planned thermal coal production and its climate-related targets and commitments.

Why Glencore?

Glencore is a large global diversified miner, with a sizeable asset base of metals such as copper, zinc and nickel, which are critical to support the energy transition. However, it is also the world’s largest producer of thermal coal,¹ a commodity primarily used in electricity generation, where demand is expected to decline rapidly if we are to achieve the Paris objectives of 1.5C.

Phasing out coal for electricity generation is a central pillar in the most recent 2022 IEA Net Zero Emissions (NZE) scenario, with demand falling by two-thirds between 2021 and 2030.

Given its diversified business, we want to see Glencore playing a leading role in the energy transition as the global economy decarbonises. There is currently a question mark over exactly how the company’s net zero commitments align with its thermal coal production outlook. This is why we have collaborated with like-minded investors to seek more disclosure by filing this proposal. In what we see as a strong sign of support, the most influential proxy advisers, ISS and Glass Lewis, have recommended shareholders to vote in favour of the proposal.

For more information about how we are voting, please refer to our pre-declaration blog.  

 

*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.

 

1. Source: https://www.glencore.com/who-we-are/at-a-glance#:~:text=Founded%20in%20the%201970s%20as,emerging%20regions%20for%20natural%20resources.