Glencore Plans to Cap Coal Output in Climate Shift, Sources Say

(Bloomberg) -- One of the world’s biggest sellers of coal is yielding to investor pressure on climate change, the clearest sign yet that the movement is sweeping the natural resources industry.

Glencore Plc has promised to limit coal production and align the business with Paris climate targets. It’s a surprising about-face from a company that’s spoken glowingly of coal in the past and snapped up major Australian coal mines from rivals that were exiting the industry.

More broadly, the move shows that business forces are aligning on climate change in ways that will reshape energy and mining for years to come, even with U.S. President Donald Trump steadfast in his commitment to expanding the coal industry. The anti-coal movement has already led the biggest miners in the world to exit the business or pledge not to invest, and oil producers have vowed to cut greenhouse gas emissions.

Who else is taking action on climate change? 
  • Royal Dutch Shell Plc plans to reduce its net carbon footprint by half by 2050. Shell bowed to shareholder pressure to set short-term emissions targets after earlier saying it wouldn’t.
  • BP Plc has promised to cut greenhouse gases and link progress toward those targets to staff bonuses. The company will also disclose more information to show how the business is aligned with Paris goals. 
  • Rio Tinto Group was the first major mining company to exit coal last year. It’s called climate change a critical issue for the business. 

“We’ve been going through all the issues, it’s been a lengthy period,” said Glencore Chief Executive Officer Ivan Glasenberg. “We have found a resolution where both parties are happy, it makes sense, we think we’re doing the right thing.”

For Glasenberg, coal is personal. The 62-year-old billionaire South African started his career arranging coal shipments in Johannesburg in the early 1980s, when the company was called Marc Rich + Co AG. He rose through the trading ranks to eventually run the coal book.

Glencore Plans to Cap Coal Output in Climate Shift, Sources Say

However, Glencore is far from abandoning the dirtiest fossil fuel. In fact, coal remains the chief money maker among its industrial assets. In recent years, as other companies retreated from coal, Glencore ramped up the business by picking up mines in Australia.

“Limiting ourselves with no further growth will tighten up supplies. It should bode well for prices,” Glasenberg said. “It’s one of the commodities in the world where there is no big increase in new supply.

Higher prices would deliver even more profit for Glencore, which mines and trades about 20 percent of global traded coal.

Glencore said it will limit output of thermal and metallurgical coal at around current guidance levels of 145 million metric tons a year, and develop long-term targets to reduce emissions. The company won’t carry out major acquisitions if it would materially add to total production, according to people familiar with the plans.

The move follows engagement with a network of investors with about $32 trillion under management called Climate Action 100+.

Other miners and financial institutions are increasingly backing away from coal. At least 15 of the biggest banks have policies that prevent investing in coal projects. BHP Group and Anglo American Plc have already said coal will struggle to compete with other assets for investment.

“Institutional investors have been able to align their long-term interests with Glencore’s aim to become a proponent of the energy transition,” George Cheveley, a portfolio manager at Investec Asset Management’s Natural Resources Team, said in a statement.

©2019 Bloomberg L.P.