Just a year ago, Gary Nagle was complaining that investors in Europe seemed to care more about lofty environmental, social and governance (ESG) issues than making money.
But on Wednesday, the chief executive of Glencore changed his tune, as he explained why his company was now hanging on to its controversial coal business.
“The ESG pendulum has swung back,” the South African declared. “Cash is king.”
Investors had initially supported the company’s decision to ditch coal. Now, he said, they were strongly against it.
Asked whether European shareholders differed from their American counterparts, Mr Nagle simply replied: “No.”
The dramatic U-turn comes just months after Glencore announced plans to spin off its thermal coal and steelmaking coal division, having strengthened it after a $7bn (£5.5bn) deal with Teck Resources.
This would have seen the demerged business leave Glencore’s control and list separately on the New York Stock Exchange, where investors were supposedly more willing to back fossil fuel-focused companies.
It followed “positive feedback” from shareholders, who at the time of the deal indicated they supported the move.
Yet when the mining giant recently consulted them again, the overwhelming majority rejected the proposal.
According to Glencore, investors have “evolved” their stance and now take a different view of the coal business. Top names on the register include fund giant Black Rock.
While spinning off the division would have cut Glencore’s carbon emissions on paper, Mr Nagle explained, it may ultimately have put the business in the hands of less scrupulous owners.
“The world has recognised the need for coal and the requirement for coal as we decarbonise,” Mr Nagle said on Wednesday.
“[Investors] support our rundown strategy and see no benefit in spinning off coal to be run by someone else, which may have unintended consequences.
“We have seen shareholders’ views change, we have seen stakeholders’ views change... And we are very much supportive of this decision because we believe it is the right decision.”
The change in attitude is not limited to Glencore. Around the world, geopolitical crises have prompted investors to reassess blanket ESG rules banning them from supporting fossil fuel producers or defence companies.
Many are also reluctant to turn their back on large profits.
In the past year or so, oil companies such as Shell and BP have walked back some of their green energy commitments to refocus on fossil fuels.
Wael Sawan, Shell’s chief executive, said it would be “irresponsible” to shut down oil and gas production prematurely, as he has vowed to boost shareholder returns.
In that same vein, coal – despite international pledges to “phase down” its use – remains a hugely profitable business for Glencore.
Demand reached a record high of 8.4bn tonnes in 2022, according to the International Energy Agency, at a time when the Ukraine war was pushing up the price of natural gas.
This propelled Glencore’s coal business to profits of $18bn that year, followed by profits of $8bn in 2023.
Keeping it in-house will mean the mining giant can pump more cash into green transition metals needed for electric cars, batteries and renewable energy systems, such as copper, cobalt and nickel.
Any leftover cash can then be handed back to investors in the form of dividends or share buybacks.
According to Glencore, two thirds of the company’s investors were asked for their views on the coal demerger, with 95pc voting in favour of retaining the business.
But across the entire shareholder register, Mr Nagle said “the absolute, overwhelming, vast majority” felt the same.
He even predicted there would be no backlash from environmental campaigners, despite the fact that some are suing the business for failing to spell out how it will meet its 2050 climate targets.
“The overwhelming feedback was that spinning out the coal business is, in fact, ESG-negative and keeping it in Glencore’s hands, with its responsible operating practices and rundown strategy, is far better than spinning it out,” Mr Nagle said.
“I think it’s a rational decision, from an ESG perspective. Sense is now starting to prevail.
“And I don’t actually see any negative reaction. In fact, some of the leading [environmental groups] have been pushing [against] divestment, and don’t believe divestment is the right solution.
“They believe in holding it within our responsible hands.”
At present, Glencore has pledged to halve its carbon emissions by 2035 by closing 12 coal mines. It has already shut five of them, with seven to go.
The company has long argued that steelmaking coal will have a much longer shelf-life than thermal coal, which is burned for power.
Yet experts warned that jettisoning these assets would by no means take them out of circulation. In fact, they suggested the opposite could happen.
For example, Anglo American spun off its thermal coal business, Thungela Resources, in 2021 – only for the newly-independent company to massively ramp up production.
A report by the Ohio-based Institute for Energy Economics and Financial Analysis said in May: “Investors have increasing concerns about how responsible it is to divest coal mine operations given the lack of any emissions impact such a move would have.
“Indeed, emissions may actually rise if the new owners seek to increase output.”
This may also be the current thinking at BlackRock, a top five Glencore shareholder which vowed to put climate change at the centre of its investment strategy in 2020 by swearing off thermal coal companies.
Naomi Hogan, company strategy lead at the Australasian Centre for Corporate Responsibility, says: “As a general rule, a responsible wind down of coal production is a better way to manage emissions than to spin off of coal assets.
“Good corporate governance requires Glencore to take responsibility for the emissions from its coal portfolio, and that will be part of the focus for many investors.”
Even so, Glencore may still find itself on a collision course with climate activists who dispute Mr Nagle’s claim that its coal business is no longer a problem.
Along with other claimants, British charity ClientEarth is currently taking the company to court in Australia over alleged “greenwashing”. They argue Glencore has not made a serious plan to cut its carbon emissions.
Catriona Glascott, a lawyer at ClientEarth, said: “For several years now, Glencore has been making net zero claims to the market, which we argue misuse an emissions pathway that is not applicable to its coal-dominated business.
“Now it seems the company is claiming to speak on behalf of investors when it says the ESG pendulum has ‘swung back’, while also continuing with its net zero statements.
“Glencore can have an expanding coal business, or it can be aligned with the decarbonisation goals of the Paris Agreement and a liveable atmosphere. It can’t have both.”
