Glencore’s directors must pay for climate wreckage
A company’s board of directors is responsible for overseeing the company’s strategic direction. So when that strategic direction is driving dangerous climate change — should its directors be held responsible, and how? Should they be removed from the board? You might think so, but in reality, directors of fossil fuel companies are rarely, if ever, held to account for strategies that are clearly misaligned with the Paris Agreement.
In the lead up to its AGM last week, one of JP Morgan’s directors, Lee Raymond, came under intense criticism from some shareholders due to his previous role as CEO of ExxonMobil, one of the world’s largest oil companies. JP Morgan is one of the largest lenders to the fossil fuel industry. Despite nearly 50% of shareholders supporting a resolution calling on JP Morgan to set ambitious climate targets, Raymond’s re-election was opposed by just 15% of shareholders, indicating that JP Morgan shareholders do not view the removal of directors as a way to push their climate commitments.
A similar thing happened this week at the AGM of ExxonMobil, a company that has steadfastly refused to comply with the wishes of its shareholders on climate matters. At ExxonMobil’s AGM, protest votes against two of its directors were seen as a novelty, and not widely supported. Despite ExxonMobil’s long record of climate obstructionism, not a single director of that company has ever been removed on grounds of poor climate risk management.
If there were a company whose directors should be held responsible for climate action, it’s Glencore. Glencore, for the uninitiated, is one of the largest mining companies in the world, and the world’s largest coal exporter. Headquartered in Switzerland, it has a reputation for being ruthless. In addition to climate destruction, its track record includes serious human rights abuses, and widespread workplace health and safety, and environmental non-compliance.
At least one proxy adviser has recommended shareholders vote against the re-election of two of the company’s directors on climate grounds, at its upcoming AGM.
Glencore produces nearly 140 million tonnes of mostly thermal coal each year, along with roughly 5.5 million barrels of oil. In February 2019, Glencore announced it would cap coal production at 150 million tonnes per year, seemingly ruling out any major expansion of its coal business. The announcement came in response to pressure from investors about the company’s woeful approach to climate change. Glencore recently projected its Scope 1 & 2 emissions would decline by 30% by 2035, due to the depletion of its coal and petroleum reserves. This is not a target, however, but a forecast.
In hindsight, Glencore’s 2019 announcement was a masterstroke — the announcement generated good press for the company, and the cap itself allowed just enough wiggle room for Glencore to develop its United Wambo thermal coal mine in the Hunter Valley. That mine was approved in August 2019 and will produce up to 10 million tonnes per year for 23 years. Locals oppose the project due to concerns about air quality, impacts on water resources, and of course, climate change.
In an update to investors in December 2019, Glencore said it had a “significant pipeline of internal brownfield and greenfield growth options for when markets inevitably require these commodities”, pointing to 14 billion tonnes of coal reserves on its books, in South Africa and Australia. The company also claimed that “thermal coal with CCS has a critical role to play in the successful transition to a low carbon economy”.
Glencore has a long track record of opposing government climate policy in Australia and pretty much everywhere else, too. UK-based think tank InfluenceMap said of Glencore, that it:
“…appears unsupportive of immediate action on climate change and is negatively engaged via a network of trade associations on several strands of climate change policy.”
Glencore is a longstanding member of the Minerals Council of Australia (MCA), contributing $3.3 million in 2018/19, or nearly 15% of the lobby group’s revenue. While the MCA may have toned down its public pro-coal advocacy in recent years, it remains a significant impediment to positive climate action. Last year, the MCA was one of the loudest advocates for Kyoto carryover credits, which Australia used to effectively disrupt the COP25 talks in Madrid.
Glencore is also one of the largest members of the NSW Minerals Council. Ahead of the NSW state election in March last year, the NSW Minerals Council urged all political parties to commit to the future of the coal industry. Then, after the Independent Planning Commission rejected the Bylong coal mine on climate grounds on 18 September 2019, Glencore representatives joined the NSW Minerals Council and Peabody Energy in an urgent meeting with the NSW Minister for Planning, Rob Stokes. We know this because the meeting was recorded in Stokes’ parliamentary diary, on the very day that the decision was handed down.
Just days after the Bylong decision, the NSW Minerals Council launched an advertising campaign against the Independent Planning Commission.
We previously covered the NSW Minerals Council’s advertising campaign here. In short, the campaign, along with relentless pressure from Newscorp newspapers, saw the NSW government attempt to rule out consideration of Scope 3 emissions from planning decisions. Whitehaven Coal CEO Paul Flynn told an investor conference just last week:
“Our understanding is that the previous anomaly of IPC concerning itself with Scope 3 emissions, our understanding is that avenue of pursuit of concern has been taken off the table, and that won’t be a feature of the final stages of the process for the Vickery project and projects generally then after…” (AFR, 20 May 2020)
Four years ago, again in response to investor pressure, Glencore formed an internal Climate Change Working Group, led by Chair Tony Hayward.
However, the working group appears to be largely ineffective. In early 2019, the Guardian revealed that Glencore had been funding a campaign called “Project Caesar”, run by CT Group, the firm founded by Lynton Crosby and Mark Textor. The campaign began in early 2017 with an annual budget of £4–7 million (AU$ 7.5–13 million). According to the Guardian:
“A sophisticated digital campaign was mounted to help shift public sentiment towards coal, using messaging informed by research, focus groups and polling conducted in multiple countries.” (The Guardian, 7 March 2019)
The Glencore board also has a Health, Safety, Environment and Communities committee. It has four members: Chair Tony Hayward, CEO Ivan Glasenberg, Patrice Merrin and Peter Coates, who chairs the committee.
Tony Hayward was the CEO of BP at the time of the Deepwater Horizon disaster. Ivan Glasenberg has run Glencore since 2002. Patrice Merrin is the former CEO of Canada’s largest thermal coal producer, Luscar.
Peter Coates, the only Australian on the board of Glencore, is a long time mining executive. Coates joined Glencore in 1994, then left to lead XStrata Coal, then returned to Glencore years later. Coates also chaired Australian oil and gas company Santos between 2009 and 2013. At various times in the late 1990s and early 2000s, Coates chaired the Minerals Council of Australia, the NSW Minerals Council of Australia and the Australian Coal Association.
According to former Liberal Party staffer Guy Pearse (High and Dry, 2007), Peter Coates was considered to be one of the “most influential” business figures on climate policy throughout the Prime Ministership of John Howard (1996–2007). At that time, the mining industry fought tooth and nail against the ratification of the Kyoto Protocol, which Howard effectively avoided during his term in office.
As Chair of Santos, in 2017 Coates famously said that the company’s business plans were based on 4°C of warming. He didn’t even blink.
In 2019, on the same day that Glencore announced its next to useless cap on coal production, Coates delivered a speech in Sydney to the Australasian Institute of Mining and Metallurgy on ‘Why Coal Matters’. In that speech, Coates claimed that the “climate change debate” had become “illogical”; that coal was a “safe, secure and reliable base load source of energy”, and that “more not less coal will be used in the future”.
“…the climate change debate has become so illogical that those trying to force a particular course of action are latching onto any disastrous event and trying to blame it on coal.” — Peter Coates, February 2019
Glencore’s annual general meeting will be held on Tuesday next week (2 June) in Baal, Switzerland. As is the norm, all company directors will be up for re-election. UK proxy adviser PIRC has recommended against the re-election of Chair Tony Hayward, and Health, Safety and Environment Committee Chair Peter Coates, on climate grounds. There is a pretty compelling case for this advice. However, the two largest proxy advisers — CGI Glass Lewis and ISS — have recommended for the re-election of all directors.
In Australia, Glencore’s fingerprints are on almost every piece of advocacy that seeks to delay climate action, and ensure the continued use of coal. So, why do shareholders continue to re-elect those responsible for a strategy clearly at odds with a safe climate, even when those same shareholders support the adoption of more ambitious climate strategies?
In all likelihood, Hayward and Coates will be re-elected with large majorities. But if we’re to have any hope of preventing the worst impacts of climate change, directors like Hayward and Coates must be removed.
