A big European investor says they will back Glencore chief executive Gary Nagle’s strategy for the future of the company’s coal mines so long as the strategy remains aligned to a net-zero emissions outcome.
Sweden’s government-run pension fund AP7 said it would engage with Glencore over the future of its coal division, which was put in the global spotlight on Thursday when Australian investor Tribeca Investment Partners called on Glencore to abandon plans to demerge coal.
Australian coal provided more than 52 per cent of Glencore’s earnings last year, but its NSW and Queensland mines will soon be demerged from Glencore under Mr Nagle’s plan to create a pure coal mining champion on the New York Stock Exchange.
Mr Nagle has promised to only go ahead with the demerger if shareholders agree and AP7 told The Australian Financial Review it was willing to put its trust in the man whose previous role was running the coal division from Sydney.
“As long as they appear to be following a path towards a net-zero goal, we leave it to the board to decide what steps to take,” AP7 spokesman Johan Floren said.
“As active owners, we seek to identify principles to enforce with like-minded peers, that will improve the overall sustainability of the market as well as of our portfolio. In this case, that means we engage with Glencore on transition plans.”
Tribeca argued this week that Australian investors were more pragmatic about the energy transition than European peers who had “demonised” fossil fuels.
The Sydney fund posited that Glencore would therefore attract better valuations if it kept the coal division and shifted its primary listing to the ASX.
Several big Australian superannuation funds were aware of the arguments that Tribeca put to the Glencore board this week and are understood to be supportive of the ASX listing, which would give them more opportunities to invest in “future-facing” metals like copper.
However, none of the Australian superannuation funds contacted on Thursday – HESTA, REST, CBUS, AustralianSuper, Unisuper, Aware Super and Mine Super – were willing to confirm their support for the Tribeca plan.
While Glencore has vowed to consult with investors about the plan to demerge coal and only push ahead if shareholders support it, the management and directors are understood to be less interested in the idea of listing on the ASX.
Mr Floren said AP7 planned to stay on the Glencore register long-term so long as it was seeing action on climate change.
“As long as Glencore is part of our index and we have not blacklisted the company, we will continue to be invested. But expectations will rise gradually and we will hold them accountable to their commitments,” he said.
A gradual move from fossil fuels
Glencore’s plan to demerge the coal division comes despite the company playing a pivotal role over the past five years in convincing investors, regulators and environment groups that it was better to retain and gradually retire fossil fuel assets, rather than simply divest them.
That argument has since been adopted by BHP at the Mt Arthur mine in NSW, where a plan to retain and retire the mine has been applauded by environmentalists.
Abrdn is a top 20 shareholder in Glencore and the firm’s investment director Andrew Mason said, as a general rule, divesting from fossil fuels was not the answer.
“In most circumstances, we do not believe that simply divesting as quickly as possible will achieve the best outcome,” he told the Financial Review.
“Companies need to have credible strategies that support real-world decarbonisation. This includes a timeline for a managed phase-out, interim milestones, and defined strategies to reach them.
“A credible phase-out strategy is also likely to facilitate a just transition and minimise the impact on workers, communities and regional economies.”
Written by Peter Ker
Source: AFR
