Analysis: Glencore’s 2024-2026 Climate Action Transition Plan

Executive Summary

Introduction

Despite escalating investor concerns around the company’s exposure to climate risk, Glencore’s 2024-2026 Climate Action Transition Plan (CATP) moves the company further from aligning to a net zero emissions pathway.

ACCR has undertaken a detailed assessment of this highly anticipated report and finds that Glencore has failed to improve transparency around its thermal coal production and Paris alignment. Worse than stagnating or failing to improve the plan based on detailed investor feedback, Glencore’s climate disclosures have gone backwards overall.

After 30% of its shareholders voted against its previous climate plan in 2023, this CATP was an opportunity for Glencore to put forward a more credible strategy to navigate the risks of the energy transition.

Glencore has a policy of running its current mines to the end of their economic life,^[1] is actively pursuing significant mine expansions and is acquiring Teck Resources’ Elk Valley Resources (EVR) coal mines, which are forecast to produce coal until the early 2060s. This strategy is inconsistent with the actions required for the world’s seventh highest emitting investor-owned company^[2] to reduce its emissions in line with the goals of the Paris Agreement.

Despite the enormity of Glencore’s energy transition challenge, the new CATP fails to give a full and accurate account to investors of their risk exposure, owing to the vast emissions from Glencore’s coal business. For example, the CATP fails to disclose expected forward production for coal between now and 2030, fails to detail how coal-related capital expenditure (capex) will be allocated, and provides limited insight into future emission levels. This makes it near impossible for investors to test Glencore against acceptable benchmarks for Paris alignment.

Significantly, as the world’s largest thermal coal exporter, Glencore is now stepping back from a previous commitment to decarbonise in line with the International Energy Agency’s (IEA) only Paris-aligned scenario, the Net Zero Emissions by 2050 (NZE) scenario. While it states it still supports the goals of the Paris Agreement, there is no evidence this sentiment is supported by strategy.

Glencore’s highly selective and inconsistent approach to setting climate targets, and measuring progress against those targets, is increasingly incongruous with investors’ expectations of a coal-producing company that genuinely supports the goals of the Paris Agreement.

Key Findings

• Glencore’s 2024-26 CATP continues a trend of failing to provide transparency and higher quality disclosures on its forward thermal coal production volumes and emissions. This inhibits the ability of investors to better understand their financial exposure to transition risk.
• In response to Glencore’s lack of disclosure, ACCR has independently modelled the company’s forward coal production, including the acquisition of Teck’s EVR metallurgical coal mines. It finds Glencore’s coal production is estimated to increase by about 3% from 2023 to 2030, contrary to the latest science.
• Glencore attempts to portray itself as Paris-aligned by relying on an inflated baseline year which is not representative of its business, creating an impression of emissions already having dropped by 22% since 2019.
• From an inflated 2019 baseline year, Glencore reported a ~20% reduction in emissions by 2020. This allows Glencore’s coal emissions to stay broadly flat through the 2020s while meeting its 15% reduction by 2026 target. Glencore’s coal emissions significantly deviate from the NZE pathway for coal emissions.

Chart 1: Glencore’s coal emissions are forecast to remain broadly flat through the 2020s, which significantly deviates from the NZE coal emissions pathway

Source: Glencore, IEA World Energy Outlook extended datasets, ACCR estimates

• Glencore’s 2024-26 CATP steps back from a previous commitment to decarbonise in line with the IEA’s only Paris-aligned scenario, the NZE scenario. This abrupt change serves to undermine transparent, consistent and credible communication with investors.
• ACCR modelling shows Glencore’s coal emissions forecast is not aligned with the NZE scenario or the Announced Pledges Scenario (APS). While Glencore’s CATP repeatedly and explicitly states a commitment to the goals of the Paris Agreement, the gap between this high-level commitment and a concrete strategy to achieve it is growing.
• Glencore’s new target of a 25% emissions reduction by 2030, set from its 2019 baseline, falls well short of a Paris-aligned coal pathway. It drags ambition backwards and pushes the vast majority of emissions reduction work to after 2030.
• Despite investors’ calls for improved coal-related capex disclosure from Glencore, the new CATP provides less detailed capex guidance for coal spending than in previous years. Glencore no longer delineates between ‘sustaining’ and ‘expansionary’ coal capex, making it very challenging for investors to credibly assess Paris alignment.
• Glencore fails to commit to assessing the emissions and climate transition implications of the Teck EVR coal mine acquisition as part of a further updated climate plan. In fact, it intends to exclude EVR coal mines from its group climate strategy and baseline from the period of initial ownership through to the potential demerger. This defies standard climate reporting and the GHG protocol.
• The CATP gives the impression Glencore will cease to provide annual climate plan updates, giving investors less climate transition risk information right when decisions around the future ownership of the coal business are under scrutiny.

Recommendations

In ACCR’s view, the substantial deficiencies of Glencore’s CATP, following three years of escalating shareholder interventions over its transition strategy, demonstrates insufficient regard for the concerns of shareholders. It further shows Glencore does not believe it is required to act consistently with the prior commitments it has made to investors to address their concerns, nor the previous disclosures it has made regarding its climate ambition.

This lack of transparency is most starkly represented by:

• the failure of the CATP to include forward-projected coal production data
• the change in coal capex guidance to be more opaque
• the walkback from seeking to align with the IEA’s NZE pathway
• the disregard for the GHG protocol for setting a representative baseline year
• the lack of commitment to provide shareholders with a fully integrated climate plan after the EVR coal acquisition is completed.

In our view, the persistent unresponsiveness to shareholder concerns over the past three years demonstrates a governance failure attributable to the Glencore board, chaired by Kalidas Madhavpeddi. The chair bears ultimate responsibility for the company’s direction, and so in our view is accountable for Glencore’s ongoing disregard of shareholder expectations on climate.

In taking the firm view that a vote against the Chair is warranted at this time, ACCR has also considered a range of other persistent governance challenges, legal cases and controversies that continue to plague Glencore’s board.

Two key points of timing have also informed our view that a vote against the chair at the upcoming AGM is warranted:

1. Glencore is at a crucial juncture as it weighs up its potential coal spin out, grappling with the biggest company decision since it listed in 2011. This is a time when, more than ever, Chairman Kalidas Madhavpeddi should demonstrate genuine responsiveness to investor feedback and requests for enhanced disclosure.
2. The 2024-26 CATP makes it clear that Glencore does not plan to offer an annual vote on a climate plan after this coming AGM, increasing the significance of this year’s vote. This AGM presents an opportunity for investors to demonstrate their expectations for meaningful disclosures and accountability to shareholders over the coming years.

A ‘No’ vote against the Chair, combined with a ‘No’ vote against the CATP, would send a strong signal that improvement is required. It would also continue a trend of escalating ‘No’ votes against the Chair since the beginning of his tenure in 2021, which have also coincided with significant and growing ‘No’ votes against Glencore’s climate disclosures.

As such, ACCR intends to vote:

• against the CATP
• against the Chair of the Board, Kalidas Madhavpeddi.

View downloadble PDF of Analysis: Glencore’s 2024-2026 CATP | 04/2024

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