The move by Australia’s largest coal mining company to respond to shareholder pressure by freezing production at current levels demonstrates the power of the global response to climate change.
According to the Australian Bureau of Statistics (ABS), coal was the nation’s biggest earner in terms of exports, generating a record $46.9 billion (USD) last year. An industry-leader, Swiss-based Glencore is the country’s largest coal miner, with its Hunter Valley operation alone producing 69 million tonnes per annum. Glencore’s investors span a range of Australian superannuation funds, which exert massive control via their $32 trillion in assets. Names among them are AMP Capital, AustralianSuper, Cbus, IFM Investors, QSuper and BT Financial Group. Glencore is a prime example of a fossil fuel industry very much alive and kicking.
However, with fossil fuels in the firing line for some time, the June 2017 guidelines released by the G20 Task Force on Climate-related Financial Disclosures (TCFD) put them front and centre as a targeted activity to fulfil the Paris Agreement pledge of a 2°C threshold on global warming. The TCFD advises funding bodies on the climate risk of their assets, so the harsher regulations on the coal industry have left investors unsettled. And they’re not alone; a survey of more than 1,200 Australian business leaders found climate change to be their top government issue. The fossil fuel industry has been forced to respond to these global community and investor pressures.
Glencore is one of the prominent coal-giants choosing to compromise their operations in order to comply. This comes in the form of a cap on its global coal output, hoping to appease investors, who themselves have had their assets threatened by the TCFD. Given previous output in Australia alone, the promised 145 million tonnes cap is a staggering arrest. Most seminal is Glencore’s open declaration about this development as being in direct “response to the increasing risks posed by climate change”. Furthermore, the company acknowledges this is part of their obligation to shareholders and the regulations they are now subject to.
Glencore’s choice to “meet the growing needs of a lower carbon economy”, means that they are turning their backs on some significant numbers. Richie Merzian of the Australia Institute laments the predicted negative effect on Glencore’s $11.4 billion investment into the country over the last ten years, a figure that amounts to a colossal $2.9 million a day. Dan Gocher of the Australian Centre for Corporate Responsibility (ACCR) further cements this as a blow to the industry, asserting that Glencore’s about-turn should be taken as a sign that Australia’s reliance on coal revenue is at an end. “One by one major investors are turning away from coal”, he says. Indeed, new mines struggle to find funding and are even blocked when they do, as seen in the New South Wales Land and Environment Court in February 2019. Glencore’s move is widely agreed to be a sign of a shift in the value of money in the fossil fuel economy; large investment and gains won’t pay off in the low-carbon long run.
In fulfilling their commitment to investors, and the TCFD, Glencore is taking footsteps in which others will surely be made to follow. Being forced to disclose how their operations and capital expenditure mitigate climate change risk, the company is also planning to review its association with various major industry bodies. Given the size and power of its members, of which Glencore is the largest, groups such as the Minerals Council of Australia has too had to acquiesce and be “attuned to community expectations”, says chief executive Tania Constable. Even more widely, caps, reviews and regulations are tipped to affect elections and governments themselves as the nature of energy production changes throughout the process, from funding to infrastructure to production.
Concessions on this scale, by fossil fuel juggernauts and their partners, in an industry with a once seemingly unbreachable profit margin and runaway production levels, demonstrate the new balance of power. Climate change regulations and global community strength of feeling alone haven’t so far been able to make a dent. However, if co-opting the investor lifeblood has shaken the foundations of a country’s national coal production, it is only a matter of time before we see shockwaves emanate throughout the international fossil fuel industry.
Asia – Pacific