Asset manager LGIM divests from Glencore over coal

Asset manager Legal and General Investment Management (LGIM) will divest from trading firm Glencore, it said today.

LGIM is "concerned that Glencore does not meet our red line asking mining companies to disclose whether they plan to increase thermal coal capacity", it said. It filed a shareholder resolution last year requesting that Glencore disclosed how its projected thermal coal output aligns with the Paris climate agreement.

The asset manager takes the approach of "engagement with consequences" on climate-related issues. As a result of this, it will vote against 37 companies and divesting from 16 firms "that failed to meet our red lines", it said. It is able to apply exclusions in funds representing nearly £176bn ($222bn) of assets. LGIM had assets under management of £1.16 trillion ($1.46 trillion) at the end of 2023. LGIM did not move any companies off its divestment list, which includes oil major ExxonMobil, shipping firm Cosco and utilities Kepco and PPL.

LGIM supports limiting global emissions to net zero by 2050, and uses its Climate Impact Pledge — with annual reports — to help companies reach the objective. It assessed more than 5,000 companies across 20 "climate-critical" sectors for this year's report. The assessments focus on key recommendations from the Task Force on Climate-related Financial Disclosures, which is now incorporated into the International Sustainability Standards Board framework. LGIM informs companies of its assessment, to allow them to improve on any areas necessary.

The asset manager expects companies to measure and report Scope 1 and 2 greenhouse gas (GHG) emissions and expects "banks to restrict financing related to unabated thermal coal, new oil and gas fields and commodity-driven deforestation."

It also introduced new baseline expectations for the oil and gas, mining and utility sectors. Oil and gas firms must disclose methane emissions, while mining companies must not expand thermal coal mining capacity. Utilities must not expand thermal coal power generation, LGIM said. It identified 455 companies "as subject to voting sanctions" in the 2024 proxy season, it said. Of these, 106 were firms in emissions-intensive sectors — such as oil and gas and utilities — that did not meet expectations.

LGIM highlighted recent improvements, including on climate disclosure, Scope 3 reporting and "net zero ambition". But "more policy change is required" for the world to reach net zero. And "carbon intensive assets are often being phased out, according to their end-of-life timelines, as opposed to in line with decarbonisation needs", it noted.

Finance will be the dominant theme at the UN Cop 29 climate summit in November, and the focus on the private sector is likely to intensify. Countries must finalise details of a new climate finance goal, and many developed countries have called for a broader donor base, nodding to the private sector.

By Georgia Gratton