In a separate development the Australian coal shipments to China are facing customs delays of up to 45 days and one of the country’s biggest ports has reportedly banned the commodity altogether, fuelling fears that Beijing will use trade as a political weapon against Canberra.
One coal trader toldThe Australian Financial Reviewthat Dalian Ports Group, which oversees five key harbours in China’s north, had banned Australian coal imports.
Analysts were also sceptical of Glencore’s move saying the miner stands to benefit from the production limits.
Wood Mackenzie research director Prakash Sharma said capping coal production was significant because prices could remain high amid tighter supplies. “Glencore is chasing value over volume,” he said.
A ‘win, win’ for Glencore
Ben Cleary, a fund manager for global resources asset fund Tribeca, said the decision to cap coal production was a “win win” for Glencore.
“This is a fantastic way for Glencore to be able to control supply into the coal sector and at the same time appease a whole lot investors that have increasing ESG requirements,” he said.
Jeremy Bond, of specialist resources fund Terra Capital, concurs that there is increased pressure on fund managers to reduce their thermal coal exposure for both climate and economic reasons. “If I was cynical about it, I would say that it probably suits Glencore quite well,” he said.
Resources Minister Matt Canavan dismissed Glencore’s decision as one designed toprotect its profitability rather than the planet.
Labor leader Bill Shorten said coal still had a future following Glencore’s announcement of a production cap, but has refused to endorse Adani’s Carmichael coal mine in Queensland.
In an unlikely partnership, CFMEU and Queensland Resources Council have written a letter to Queensland Premier Annastacia Palaszczuk expressing their concerns about extra conditions being put on the Carmichael mine.
Climate Action 100+, members of which collectively control $32 billion, is being credited for a remarkable change of heart by hard-headed Glencore chief executive officer Ivan Glasenberg, who has previously trumpeted the ongoing contribution of coal.
AustralianSuper senior manager of investments governance Andrew Gray, who sits on the global steering committee of Climate Action 100+, believes the model of collective investor action demonstrated by the initiative is a game-changer, and not just for climate change.
“It’s powerful because there are so many investors on board,” Mr Gray toldThe Australian Financial Reviewin an interview prior to the Glencore announcement. “It has really moved the game forward in terms of investor engagement and pressure on companies on climate change.
“It’s also a pretty good template for the way investors can tackle other ESG [environmental, social and governance] issues.”
AustralianSuper declined to comment further on Thursday.
A global score card
Climate Action 100+ is preparing to publish a global score card assessing 160 “systemically important emitters” on disclosure of climate change risk and the adoption of emissions reduction strategies in line with the Paris Agreement, which sets a target of keeping global warming below 2 degrees compared with pre-industrial levels.
Along with BHP and Rio Tinto, 10 Australian companies are on the target list: Adelaide Brighton Ltd, AGL Energy Limited, Boral Limited, Qantas Airways Limited, Santos Limited, South32 Limited, Woodside Petroleum Ltd, Woolworths Group Limited, Bluescope Steel Limited and Origin Energy.
Investor Group on Climate Change (Australia/New Zealand) chief executive Emma Herd, also a member of the Climate Action 100+ steering committee, said more companies would need to align their business decisions with the Paris Agreement.
Glencore has spent $US2.7 billion ($3.8 billion) over the past two years addingcritical mass to its Australian thermal coalbusiness. The company said it would review its membership of associations not aligned with the Paris climate agreement, including the Minerals Council of Australia.
“Call me cynical, but I think their announcement overnight appears to be much more to do with the self-interest of Glencore than the planetary interest of trying to save the climate,” Senator Canavan said.
“They obviously want to maintain their dominant position, particularly in the seaborne thermal coal market.
“Good luck to them. What I would like to see is that Australian mining companies and Australian jobs capture as much of the world coal market as possible. And that market is booming.”
Climate Action 100+ member, the Church Commissioners for England, led discussions with Glencore.
“Delivering on the goals of the Paris Agreement requires unprecedented collaboration and [the] announcement is a positive step forward for Glencore, its investors and the fight against climate change,” said Edward Mason, the head of responsible investment for the Church Commissioners for England.
“Investors will now want to hold the company to its commitments and to ensure that the methodology for determining the company’s alignment with the Paris goals is robust.”
Benchmarking to come
Launched in December 2017, Climate Action 100+ is coordinated by five partner organisations: Asia Investor Group on Climate Change;Ceres;Investor Group on Climate Change;Institutional Investors Group on Climate Change; and,Principles for Responsible Investment.
The organisations, along with five investor representatives from AustralianSuper, California Public Employees’ Retirement System, HSBC Global Asset Management, Ircantec and Manulife Asset Management, form the global steering committee for the initiative. Australian members include large industry funds such as HESTA and Cbus, along with AMP Capital, BT Financial Group and Colonial First State Asset Management.
Climate Action 100+ is preparing to publish benchmarking analysis for each of the 160 target companies.
An initial list of 100 focus companies, including BHP and Rio Tinto, was identified in December 2017.
Last July an additional list of 61 companies – known as the “+” list – was added to reflect regional concerns.
Chris Newton, the executive director of responsible investment at IFM Investors, said the Climate Action 100+ agenda had a long way to run.
“We will continue to advocate here in Australia for executives to actively manage their climate change risk and take hold of any opportunities that climate change may bring,” he said.
“Recent extreme weather events around the world have brought home to millions of people the importance of climate change disclosure to shareholders and investors.”
With Brad Thompson and Natasha Gillezeau