In April 2021, Glencore put forward a management resolution seeking investor support for the climate change strategy that it laid out in December 2020.  (94% of the investors that voted supported the resolution.)

This resolution is the next stage in a continued process of dialogue between the company and investors on climate change related issues and it is notable because it has been put forward by the company management - rather than by shareholders themselves.

It should be noted that Glencore has not seen the same level of confrontational engagement as some of its sector peers have.

• This may be because European investors on the company's shareholder register tend to either divest completely (as some Nordic investors to) or to engage privately and constructively
• It may, however, be down to the company's longstanding programme of investor engagement on sustainability which ensures that differences of view can be resolved away from the AGM

Given the increasing number of climate change-related resolutions and the controversy kicked up by some of them, it will be instructive for companies to understand the background behind this from both an investor's perspective (given by Carlota Garcia Manas, currently at Royal London Asset Management; previously at Church of England Commissioners and Pensions Board) and the company's perspective (given by Anna Krutikov and Pam Bell of Glencore).

Where did the journey start for you?

Carlota: I took over the climate engagement with Glencore in 2016.

Anna / Pam: Glencore has participated in dialogue with investors about sustainability issues in general well before the Aiming for A resolution encouraged us to focus specifically on climate change.

In 2016, extensive stakeholder engagement on climate change helped us develop our first Climate Change Considerations for Our Business report.  Then, at the 2016 Glencore Annual General Meeting, Glencore’s shareholders supported a special resolution to participate in the ‘Aiming for A’ investor coalition initiative.

What actions did this engender?

Anna / Pam: Of course, many stakeholders are interested in our approach to climate change.  So, it would be wrong to single investors out as the sole driver.  However, actions that Glencore has taken subsequent to 2016 that are likely to be of particular interest to investors include:

• The development of an internal, cross-functional and multi-commodity working group, led by our Chairman and with Board oversight to consider climate change matters. 
• The integration of carbon emissions and energy into our annual business planning processes. 
• Considering how we can support greater R&D and investment into low emission technologies
• Reviewing our carbon emissions and energy profile including an assessment of potential mitigation and abatement projects which will form the basis of an internal Marginal Abatement Cost Curve (MACC) across the business and introduction of a carbon target for our business
• Developing a more detailed risk management framework for identifying, assessing and managing material climate change risks
• Examining the potential implications for our asset portfolio from policy developments and market movements linked to climate change issues

With which of the highest profile climate-related investor initiatives to do you engage and why?

Carlota: I have been an active participant in CA100+ since its inception via IIGCC and have been active with IIGCC since 2016.  I was also heavily involved in the construction of the Transition Pathway Initiative (TPI) during my time at the Church of England National Investment Boards.

(See below for listing of climate-related investor initiatives)

Anna / Pam: We have been involved with CA100+ and the TPI since their formation. We were early implementers of the TCFD recommended disclosures, and have been working closely with CA100+ to evolve our positions related to climate change.

When / why do private discussions become shareholder resolutions?

Carlota: We operate an escalation method to support our stewardship efforts.  As shareholder resolutions are very time-consuming, resource intensive mechanisms, they are one of the “tools of last resort” for us.  They are normally only used when an engagement is not delivering the expected result. However, they can also be used to gauge shareholding support/views on a particular recommendation.

Why did Glencore decide to put forward a management resolution on climate change?

Anna / Pam: We recognise that climate change is a material issue for our shareholders. Having made significant climate commitments in December, we felt it was important to give shareholders the opportunity to express their views on issues that are going to have a significant impact on our business strategy.

Away from the AGMs and resolutions, what do you do to help investors understand your exposure to and management of climate-change related issues?

Anna / Pam: We would highlight four things:

• Understanding what each investor really needs and prioritises
• Conducting regular outreach to all investors
• Staying engaged with the major investor initiatives on the issue
• Maintaining an open-door policy on these issues

Understanding what investors really need

In 2018, we engaged consultants to undertake a project to understand the sustainability and climate change interests and needs of our major investors.  Importantly, we looked at each investment firm in turn to understand how they were positioning themselves on the issue and what they needed from us.  This has helped us to focus our messages and communications activities over the years ahead.

Conducting regular outreach to all investors

We provide an update on climate change at our annual investor presentation in December, as well as in our annual and sustainability reports.

Climate change has become a significant part of our discussions with our mainstream investors, as well as those with a more specialized focus.

Our climate change specialists participate in our annual investor roadshow, and we regularly involve them in our engagement with investors, analysts and relationship banks.

Staying engaged with the major investor initiatives on the issue

We have regularly engaged with CA100+ since its evolution from the Aiming for A initiative, with our Chairman often participating in discussions. We have been similarly active in TPI, working with its team to strengthen its understanding of measuring emissions for a diverse mining company. 

Maintaining an open-door policy

We have an ‘open-door’ policy at Glencore and are happy to engage with our stakeholders on an ad hoc basis outside of the more formal reporting calendar.

How would you advise (other) companies to manage their investor communications on climate change?

Anna / Pam: Two things are critical:

• Disclosure: The TCFD guidelines provide a good framework for disclosure on climate change – supporting comparability between companies, the Holy Grail for investors!
• Senior management: Then, having a senior management team with a strong interest in and a good understanding of climate change matters and their impact the business is a must - both for communicating with external stakeholders and for driving internal change. 

Carlota: While the interest of investors in climate change may appear embryonic to some companies, there is a tangible sense of urgency on this issue (from policy makers, through regulators, to young generations).

So, I would encourage companies to focus on transparency and disclosure and I understand that the constraints of methodology, modelling variants and uncertainties may require them to issue caveats around some of their disclosure.

There are good frameworks to use as a starting point and the TCFD recommendations are the model that we have followed in our own climate communication: Royal London TCFD report. 

But nothing beats the direct company-investor direct dialogue!

How would you advise (other) investors to conduct their communications with companies on climate change?

Anna / Pam: Companies generally recognise the importance of disclosure.  So, if investors are transparent about the type of disclosure they want and/or how they will use data, we can adapt our reporting to better suit needs.

Then, climate change is a complex, broad and far-reaching topic and nobody knows everything.  So, engagement should be a two-way process – we are happy to learn as well as to explain our thinking.

Carlota: First, find the common ground between management and investors - typically this will be through a focus on the long-term value generation (this is particularly tricky when the conversation diverts from traditional fundamentals to ESG generally and climate particularly).  Then aim to build trust, keep your fiduciary duty centre of your stewardship efforts and always listen to the science. 

Climate-change related investor initiatives

Climate Action 100+ (CA100+)

An investor-led initiative to to ensure the world’s largest corporate greenhouse gas emitters take necessary action on climate change

Say on Climate

A campaign to encourage companies to publish a climate transition action plan and put it to an annual shareholder vote

Transition Pathway Initiative (TPI)

A global, asset-owner led initiative which assesses companies' preparedness for the transition to a low carbon economy.

The Global Investor Coalition on Climate Change

A collaboration among four regional partner organisations around the world to increase investor education and engagement on climate change and climate-related policies:

• Institutional Investors Group on Climate Change (IIGCC) in Europe
• Asia Investor Group on Climate Change (AIGCC) in Asia
• Ceres in North America
• Investor Group on Climate Change (IGCC) in Australia and New Zealand

The Taskforce on Climate Related Financial Disclosures (TCFD)

An organisation set up by the UK Financial Stability Board to develop recommendations for more effective climate-related disclosures that could promote more informed investment, credit, and insurance underwriting decisions and, in turn, enable stakeholders to understand better the concentrations of carbon-related assets in the financial sector and the financial system’s exposures to climate-related risks.