Miner and commodity trader Glencore has suffered a rebuke from some shareholders over its climate transition plan, highlighting the increased scrutiny of corporate proposals to tackle global warming.
Almost 24 per cent of votes cast at the group’s annual general meeting in Switzerland on Thursday were opposed to a resolution seeking approval for the company’s climate progress report.
As a result Glencore, which is one of the world’s biggest coal producers, will now speak to its biggest shareholders to consider changes to its strategy and provide an update in the next six months.
“We will continue to engage with shareholders on our Climate Transition Action Plan so as to ensure their views are fully understood,” Glencore said in a statement.
Ahead of the meeting Institutional Shareholder Services and Glass Lewis, two influential proxy advisers, had urged shareholders to reject the report partly because of wider concerns around management-sponsored say-on-climate votes.
Critics such as Glass Lewis say such proposals, which seek investors’ approval of climate plans, remove a level of accountability from directors who should be responsible and argue that shareholders should not support them
But there were other Glencore-specific issues. The UK’s Local Government Pension Scheme, which has been jointly leading discussions between Glencore and the influential Climate Action 100+ investor group, said it would vote against the report because of “shortcomings in target setting over the next decade”.
Glencore is aiming to cut its total emissions by 50 per cent by 2035 compared to 2019 levels, achieving net zero by 2050. In the near term it is targeting a 15 per cent reduction by 2026.
Others groups raised worries about Glencore’s membership of lobby groups whose goals are not consistent with the goals of the Paris agreement on climate change.
“Today’s vote is a great victory for shareholders and for the environmental cause”, said Giuseppe Bivona of Bluebell Partners, a London-based fund that has been urging Glencore to spin off its coal business into a separate company.
“Looking ahead we see two alternatives: either the board of Glencore will take any reasonable step to separate coal from the rest of its business or we the shareholders will take any reasonable step to separate this board from Glencore.”
The AGM was held after Glencore revealed its trading business was set for another strong year as it cashed in on price swings and market volatility caused by Russia’s invasion of Ukraine.
Earnings from its marketing unit will be “comfortably” above the top end of its guidance range of $2.2bn to $3.2bn based on first-quarter performance, the group said. If achieved, that would make it the third straight year the unit has exceeded its range.
“Our marketing activities were supported during the quarter by tight physical markets conditions and periods of extreme market volatility,” said chief executive Gary Nagle.
Glencore’s comments suggested commodity traders with access to large credit lines had taken advantage of the arbitrage opportunities and reordering of trade flows triggered by sanctions imposed on Russia.
Shares in the group were up almost 2 per cent on Thursday. They have risen around 25 per cent this year.
The news from Glencore’s mining business was not as positive, with the company reducing production guidance for copper and cobalt because of difficult ground conditions. The group also lowered its outlook for zinc.
However, Glencore’s coal mines increased production during the quarter in spite of heavy rains in Australia and South Africa. Output rose 4mn tonnes on a year ago to 28.5mn tonnes, boosted by a deal to take control of a large coal mine in Colombia.
Koniambo, the company’s nickel asset in New Caledonia, also showed improved performance.
The world’s biggest miners have had a tough start to the year, struggling to hit production targets and keep costs under control in the face of Covid-19 disruptions and wider inflationary pressures.
“In common with global peers, Glencore’s first quarter 2022 production was mostly weak,” Dominic O’Kane, analyst at JPMorgan, wrote in a note. “More positively, and carrying a more significant impact for earnings forecasts . . . strong results in commodity trading are likely to mean that for the third consecutive year Marketing could exceed top end guidance.”