Shareholder Resolution
ACCR Shareholder Resolution to Incitec Pivot Ltd on Paris-aligned targets
The Australasian Centre for Corporate Responsibility (ACCR) has filed a Shareholder Resolution to Incitec Pivot Ltd (ASX: IPL) on Paris-aligned targets.
This page contains the resolution and its supporting statement, and will be updated with links to news and additional briefings about this engagement.
Ordinary resolution on Paris-aligned targets
Shareholders request the Board disclose, in annual reporting from 2022:
- Short, medium and long-term targets for reductions in our company’s Scope 1, 2 and 3 emissions (Targets) that are aligned with articles 2.1(a) and 4.1 of the Paris Agreement;[1]
- Details of how our company’s capital expenditure, including material investments in the development of oil and gas reserves, will be aligned with the Targets; and
- Details of how the company’s remuneration policy will incentivise progress against the Targets.
Nothing in this resolution should be read as limiting the Board’s discretion to take decisions in the best interests of our company, or to limit the disclosure of commercial-in-confidence information.
Supporting statement to resolution (989 words including footnotes)
ACCR welcomes our company’s commitment to “examine and develop potential pathways to net zero operational emissions by 2050”.[2] ACCR acknowledges that our company operates in a sector with emissions that are widely considered hard-to-abate. However, our company’s existing commitments are not aligned with the Paris Agreement goal of limiting global warming to well below 2°C above pre-industrial temperatures.
Emissions performance
Our company’s operational greenhouse gas (GHG) emissions have increased 34% since 2015,[3] while the emissions intensity of its ammonia production improved by 10% over the same period.[4] This improvement was attributed to energy efficiency projects and the more efficient ammonia plant in Waggaman, Louisiana, which came online in 2016.[5]
Operational and value chain GHG emissions, 2015-20 (Mt CO2e)[6]
| Mt CO2e | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 |
|---|---|---|---|---|---|---|
| Scope 1 | 2.35 | 2.45 | 2.75 | 3.42 | 3.08 | 3.32 |
| Scope 2 | 0.36 | 0.31 | 0.34 | 0.33 | 0.31 | 0.30 |
| Total Scopes 1+2 | 2.70 | 2.77 | 3.09 | 3.75 | 3.39 | 3.62 |
| Scope 3 | N/A* | N/A* | N/A* | 6.17 | 5.78 | 5.89 |
| Total Scopes 1+2+3 | N/A* | N/A* | N/A* | 9.92 | 9.26 | 9.51 |
*Previous Scope 3 emissions disclosures related to shipping only
In 2020, our company reported its value chain emissions (Scope 3) for the first time, inclusive of material upstream and downstream emissions.[7] While there was a slight decrease in Scope 3 emissions between 2018 and 2020, it is likely our company’s 2020 Scope 3 emissions were significantly higher than 2015 due to increased production.
Our company sources 95% of its energy from fossil fuels (excluding natural gas and diesel used as production raw material), which is unchanged since 2015.[8]
Emissions targets
In 2020, our company committed to reducing its operational emissions by 5% by 2026, on 2020 levels.[9] This target is not aligned with the goals of the Paris Agreement. To date, our company has not set medium- (2030) or long-term operational emissions targets, or a target on its Scope 3 emissions.
Our company’s emissions reduction target lags those of its peers:
- Orica has committed to reduce its operational emissions by at least 40% by 2030, on 2019 levels.[10]
- Wesfarmers Chemicals, Energy and Fertilisers (WesCEF) aspires to net zero operational emissions by 2050[11] and recently issued sustainability-linked bonds that will require Wesfarmers to limit average emission intensity to 0.25 tonne CO2e per tonne of ammonium nitrate produced.[12]
Capital expenditure
The majority of our company’s capital expenditure is allocated to sustenance. In 2020, A$60.2 million was allocated to minor growth capital including “plant efficiency projects, expansion of the Delta E truck fleet, and other projects supporting explosives volume growth and technology investment”.[13] To date, our company has not allocated significant capital to decarbonisation beyond energy efficiency.
Capital expenditure, 2015-20 (A$m)[14]
| A$m | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 |
|---|---|---|---|---|---|---|
| Major growth capital | 256.4 | 215.2 | 83.1 | - | - | - |
| Minor growth capital | 16.4 | 29.8 | 52.0 | 64.6 | 55.2 | 60.2 |
| Sustenance | 100.0 | 190.5 | 184.6 | 253.8 | 246.3 | 218.2 |
| Lease buy-out | - | - | - | 6.9 | 46.6 | - |
| Total | 372.8 | 435.5 | 319.7 | 325.3 | 348.1 | 278.4 |
Our company has a 50% stake in the Range (coal seam) Gas project in the Surat Basin, Queensland. The project contains an estimated 270 petajoules (PJ) of 2C Contingent gas resource (IPL share: 135 PJ).[15] Three pilot wells were drilled and commissioned in 2021, and the project is expected to deliver first gas to market in 2024.[16] This is despite the International Energy Agency’s recently published ‘Net zero by 2050’ report concluding that no new coal, gas or oil developments could proceed beyond this year, in order to limit global warming to 1.5°C.[17]
Our company has not outlined a clear decarbonisation strategy, though it has stated that “new technologies, such as solar hydrogen, will be required to achieve… greater GHG reductions in the long-term”.[18]
In 2020, our company participated in a A$2.7 million solar hydrogen feasibility study into renewable ammonia production at Moranbah, Queensland,[19] supported by A$980,000 in funding from the Australian Renewable Energy Agency (ARENA).[20] Our company intends to use the findings from this study to develop “potential pathways to net zero operational emissions by 2050”.[21]
In October 2021, our company announced a partnership with Fortescue Future Industries to assess the feasibility of industrial-scale green ammonia production at Gibson Island.[22] The cost of this study was not disclosed.
Remuneration
Our company’s senior executives are not currently incentivised to reduce emissions via the performance-related short-term incentive (STI). Executives’ performance is currently assessed on safety, credit ratings, net profit after tax, financial measures and strategic objectives.[23]
In late 2020, our company was added to Climate Action 100+ initiative (CA100+), a global coalition of institutional investors engaging with carbon-intensive companies.[24] It is expected that our company will be assessed in the CA100+ Net zero company benchmark in 2022, which expects companies to set short-, medium- and long-term emissions reduction targets aligned with the Paris Agreement. Companies are also expected to align capital expenditure and remuneration with those targets.
ACCR urges shareholders to vote for this proposal.
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Article 2.1(a) of The Paris Agreement states the goal of “Holding the increase in the global average temperature to well below 2°C above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5°C above pre-industrial levels, recognizing that this would significantly reduce the risks and impacts of climate change.”
Article 4.1 of The Paris Agreement: In order to achieve the long-term temperature goal set out in Article 2, Parties aim to reach global peaking of greenhouse gas emissions as soon as possible, recognizing that peaking will take longer for developing country Parties, and to undertake rapid reductions thereafter in accordance with best available science, so as to achieve a balance between anthropogenic emissions by sources and removals by sinks of greenhouse gases in the second half of this century, on the basis of equity, and in the context of sustainable development and efforts to eradicate poverty. ↩︎Incitec Pivot, Sustainability Report 2020, p4 ↩︎
Incitec Pivot, Sustainability Reports 2017-20 ↩︎
Incitec Pivot, Sustainability Report 2020, p19 ↩︎
ibid. ↩︎
Incitec Pivot, Sustainability Reports 2017-20 ↩︎
Incitec Pivot, Sustainability Report 2020, p19 ↩︎
Incitec Pivot, Sustainability Reports 2017-20 ↩︎
Incitec Pivot, Sustainability Report 2020, p4 ↩︎
Orica, Sustainability Report 2020, p1 ↩︎
Wesfarmers, ‘Sustainability update including climate action commitments’, 23 September 2020, link ↩︎
EY, ‘Independent Limited Assurance Conclusion to the Management and Directors of Wesfarmers Limited’, 3 June 2021, link ↩︎
Incitec Pivot, Annual Report 2020, p22 ↩︎
Incitec Pivot, Annual Reports 2016-20 ↩︎
Central Petroleum, ‘Range Gas Project Pilot Update, Pilot Expansion to Accelerate Testing’, 24 August 2021 ↩︎
Central Petroleum, FY2021 Annual Results and Business Update, 21 September 2021 ↩︎
International Energy Agency, ‘Net zero by 2050’, May 2021 ↩︎
Incitec Pivot, Annual Report 2020, p18 ↩︎
Incitec Pivot, Sustainability Report 2020, p4 ↩︎
ARENA, ‘Renewable hydrogen could power Moranbah ammonia facility’, 30 September 2019 ↩︎
Incitec Pivot, Sustainability Report 2020, p4 ↩︎
Incitec Pivot, ‘Incitec Pivot partners with Fortescue Future Industries on green ammonia study’, 11 October 2021 ↩︎
Incitec Pivot, Annual Report 2020, p63 ↩︎
Climate Action 100+, ‘Climate Action 100+ adds to focus list of companies’, 18 November 2020 ↩︎
