LGIM sells some Glencore shares due to concerns about coal production

Legal and General Investment Management will sell some of Glencore’s shares due to concerns about the company’s coal production and its commitment to reduce carbon emissions.

The UK asset manager will sell only a small portion of Glencore stock, but it will still remain a shareholder through certain holdings. This move highlights the heated debate over emissions reduction policies.

Glencore of Switzerland, the largest coal exporter in the world, has announced plans to reduce emissions by 50% by 2035, but will not reach zero emissions until 2050, “subject to supportive policy environments”.

The latest version of the climate strategy, released in March, won over many investors by setting a 25 percent reduction in emissions for 2030 compared to a baseline year of 2019.

In May, at its annual meeting, the company received more than 90% support from shareholders for its strategy. This compares to 70% a year ago on a similar resolution without an interim target.

In its latest climate strategy, the FTSE-100 listed group has also dropped an earlier commitment — made in 2019 — that it would cap thermal and metallurgical coking coal production at 145mn tons.

Investor opposition to Glencore’s climate policy has diminished amid a wider retreat in emission reduction commitments from leading resource extraction firms such as Shell.

LGIM owns 1.33 percent of Glencore’s shares.

LGIM’s climate policy applies to funds that have £176bn in assets under management. This includes pension funds, ESG funds and ESG funds. LGIM has assets totaling £1.2tn under management, including passive funds, bonds, and other securities.

The UK asset manager stated that the sale was due to concerns about the coal producer not having climate change plans that were in line with Paris’ goal of limiting global warming to 1.5C over pre-industrial levels.

In a press release, LGIM stated that it was concerned Glencore had not revealed plans for thermal coal production aligned to a net-zero pathway.

Glencore is one of the largest thermal coal exporters in the world. Thermal coal is used for power generation.

The Swiss group has argued for years that selling coal mines to private operators is not the best option, as developing countries continue to require cheap sources of energy.

Glencore is unsure of the future of its climate strategy. The group is considering if it should split up into a coal group and a metals group after its $6.9bn purchase of Teck Resources’ Canadian metallurgical division’s 77 percent stake is completed this year.

The group plans to close at least seven coal mines by 2035. The trading house has committed not to build any new thermal mines but the company said that it could increase production at existing mines.

LGIM submitted a shareholder resolution to Glencore’s Annual Meeting last year, requesting the company disclose its projected thermal coal output aligned with the Paris Agreement objectives.

Stephen Beer, LGIM’s senior manager for sustainability and responsible investments, stated that the company had been working with Glencore far longer than just three years, but it hadn’t seen any movement from Glencore to make a commitment not to increase thermal coal production.

“With mining, there are a few red lines.” Beer asked if the company planned to increase its thermal coal capacity ?’,”. “We felt that Glencore had not met the red line.

Glencore has declined to comment.