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Legal and General Investment Management is to sell some of its Glencore shares because of concerns over the mining and commodity trader’s coal production and commitment to reducing carbon emissions.
Although the UK asset manager is selling only a small amount of Glencore’s stock and will remain an investor through some holdings, the move underlines the fierce debate on emissions reduction policy.
Switzerland-based Glencore, the world’s biggest exporter of coal, plans to cut emissions by 50 per cent by 2035 but has said it will only reach net zero by 2050 “subject to a supportive policy environment”.
It won over most investors in the latest version of its climate strategy released in March by introducing a 2030 interim target to reduce emissions by 25 per cent versus a 2019 baseline.
At its annual meeting in May, it gained more than 90 per cent support among shareholders for the strategy compared with 70 per cent a year earlier on a similar resolution but without the interim target.
The FTSE 100 listed group also dropped a commitment — first made in 2019 — to cap thermal and metallurgical coal production at 145mn tonnes in its latest climate strategy.
The diminished investor opposition to Glencore’s climate change policy comes amid a broader pullback in emissions reduction commitments by leading resource extraction companies such as Shell.
LGIM holds 1.33 per cent of Glencore’s stock.
The divestment applies to funds with £176bn of assets under management, which includes pension funds and ESG funds, where LGIM has a climate policy. This compares with LGIM’s total assets under management of £1.2tn, which includes passive funds, bonds and other securities.
The UK asset manager said the reason for the sale was because of concerns that the coal producer had not laid out climate change plans in line with the Paris goal to limit global warming to ideally 1.5C above pre-industrial levels
“LGIM remains concerned that Glencore has not disclosed plans for thermal coal production that are aligned with a net zero pathway,” LGIM said in a statement.
Glencore is the world’s largest exporter of thermal coal, which is used to generate power.
The Swiss group has long argued that the responsible rundown of coal mines is the better path to take than selling them to private operators as the developing world continues to need cheap sources of power.
The future shape of Glencore’s climate strategy is up in the air because the group is considering whether to split into a coal company and a base metals group once its $6.9bn acquisition of a 77 per cent stake in Canada’s Teck Resources’ metallurgical coal division is completed later this year.
The group has closed five coal mines since 2019 and plans to shut down at least seven more by 2035. While the trading house is committed to not building any new thermal coal mines, the company has said it could expand production at existing mines.
LGIM filed a shareholder resolution at Glencore’s annual meeting last year requesting that the company disclose how its projected thermal coal production aligns with the Paris Agreement’s objectives.
Stephen Beer, senior manager of sustainability and responsible investment at LGIM, said it had engaged with Glencore for far longer than three years but had not seen the company move towards a pledge that it would not boost thermal coal output.
“With mining, we have a number of red lines. We ask ‘is the company planning to increase thermal coal capacity?’,” said Beer. “In particular with Glencore, we thought that red line hasn’t been met sufficiently.”
Glencore declined to comment.
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