Glencore holds on to coal: ratcheted up transition risk needs a plan

The Australasian Centre for Corporate Responsibility​ (ACCR) is commenting on today’s widely anticipated announcement from Glencore plc that it will not demerge its coal business, including the newly acquired Elk Valley Resources (EVR).

Glencore says it will “assess how best to integrate the EVR assets into our climate transition strategy”. Glencore’s 2024-2026 Climate Action Transition Plan (CATP), released in April, did not address the acquisition of EVR in relation to its decarbonisation targets and ambition.

ACCR analysis shows the acquisition of the EVR coal assets materially increases Glencore’s exposure to transition risk:

• Teck’s EVR metallurgical coal mines come with an average life of 31 years, with the majority extending beyond 2050. This compares to Glencore’s existing coal assets, which have an average mine life of around 13 years.
• With the acquisition of the EVR coal mines, Glencore is boosting its potential saleable coal by over 30% through to the end of life of its mines.
• Revenue from EVR coal mines would have increased Glencore’s industrial coal revenue by 28% in the last year.

Naomi Hogan, Company Strategy Lead at the Australasian Centre for Corporate Responsibility (ACCR) said:

“With the EVR acquisition complete and the coal business to stay, Glencore’s climate plan is now outdated. Glencore needs to move swiftly and give investors much needed visibility on how it plans to manage its increased exposure to climate transition risk.

“With the announcement that the demerger is not going ahead, we expect Glencore to commit to an updated climate plan as a matter of priority.

“Investors need to understand the impact this coal acquisition has on Glencore’s emissions reductions targets.

“With this expansion of its coal portfolio comes an opportunity for Glencore to provide investors with a credible plan to responsibly wind down the coal assets in line with the Paris Agreement.

“Glencore’s new description of metallurgical coal as “carbon steel materials” looks alarmingly like greenwashing and raises questions about the company’s commitment to be upfront about its exposure to climate transition risk.

“Metallurgical coal does come with significant transition risk. The growing adoption of new steelmaking processes that don’t rely on coal indicates the risk profile for metallurgical coal is only going to increase. A recent survey of 500 investors from 34 countries found the majority (68%) foresee a transition away from metallurgical coal in steelmaking, with 80% believing metallurgical coal’s risk profile will increase in the next decade.

“Navigating the energy transition as the world’s largest publicly listed coal mining and trading business will require exemplary governance, and investors may reasonably now be looking for confidence that the board has the right mix of skills and experience to seize available opportunities and manage risk.”