Glencore PLC (LSE:GLEN) is putting its climate transition report up for scrutiny at its annual meeting on Thursday but advisory agencies recommend shareholders vote against it.
With a focus on metals demanded for the 'energy transition', the Swiss-based commodities and mining giant has had a great couple of years.
This meant shares in the FTSE 100 group, which generates about 10-15% of underlying earnings through coal, finally made it into the money almost 12 years after listing, helped in large part by a massive mining bull market created by the Covid pandemic and Russia's invasion of Ukraine, which has led to what some analysts reckon is a “turning point” for the coal industry.
The climate transition action plan at its 2021 annual general meeting garnered 94% support from shareholders, with the company putting a progress report to a vote this year. The vote will be advisory so, the board can ignore it if they lose.
While many investors will only care about the share price and that the company declared US$2.8bn of shareholder returns for the past year and has recommended a US$0.26 base dividend for 2022, there should be great concern that Glencore has recently revealed that its carbon emissions are growing - as well as claims that it may be underestimating them.
Last year, carbon dioxide equivalent (CO2e) emissions made by the company directly – known as Scope 1 emissions – increased to 15.0mln tonnes (Mt) from 14.8Mt in 2020, while its Scope 2 location-based emissions rose to 10.8Mt from 9.4Mt.
What’s more, the company may be understating methane emissions from some of its Australian coal mines, according to a report from the Australasian Centre for Corporate Responsibility (ACCR) last week.
The report said Glencore underestimate global operational emissions by 11% to 24% between 2018 and 2021, based on satellite observations of methane emissions made by the SRON Netherlands Institute for Space Research, with the ACCR advising investors to vote down the climate report because the unreliable methane measurements were a “material risk for shareholders”.
Glencore questioned whether the use of satellite technology could be used to measure methane emissions “reliably and accurately”.
Either way, institutional shareholders have been recommended by advisory body Glass Lewis to vote against the climate progress report for two reasons.
The influential proxy advisory firm said there was a lack of board oversight of the climate plan, adding that said corporate governance dictates that shareholders should elect the board and that the board should oversee management and the execution of the strategy of a company.
“Shareholders can then hold board members accountable for their failure to execute a strategy that serves shareholders’ best interests through the election of directors.”
Moreover, Glass Lewis said clarity was lacking on how Glencore will interpret support for its strategy-setting process, with the board seeking shareholder approval through an up/down vote, which it suggested would remove accountability from directors.
Glencore’s stated aim is to achieve net-zero total emissions by 2050, including a 15% reduction by 2026 and a 50% reduction by 2035 versus 2019 levels.
But with the methane leaks and the recent move rather away from coal but with an acquisition of the Cerrejón thermal coal mine in Colombia, the group is seemingly finding it hard to walk the walk and new chair Kalidas Madhavpeddi, who was appointed in July last year, may preside over a contentious first meeting.