If you want to see just how difficult it is becoming for companies to move forward with the green transition, look no further than Wednesday’s announcement from commodities trader Glencore.
The Swiss-based firm is one of the biggest traders of the likes of coal, oil & gas and many other commodities that we use in day-to-day life. In some respects, it is arguably one of the most influential companies on the planet.
So when it said last year that it would spin out its profitable but polluting coal business, it was seen as a watershed for the company and wider industry, as well as a signal that retaining units seen as environmentally damaging was becoming untenable.
The plan though has barely lasted nine months. On Wednesday, the company effectively said it would keep the coal business after shareholders pushed back against the spin-out plan.
“Over 95 per cent of shareholders that specifically expressed a preference for retention or demerger supported the retention of the coal and carbon steel materials business, primarily on the basis that retention should enhance Glencore’s cash-generating capacity to fund opportunities in our transition metals portfolio,” said the company in a statement.
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While Glencore investors have previously overwhelmingly backed the company’s plan to oversee a “responsible decline of its thermal coal operations over time”, it is not clear what “responsible” means exactly. The company has very much kept its options open.
To nobody’s surprise, the market liked the move and Glencore shares rose 3 per cent in London.
The decision to retain the business underlines how hard it is for any company to move to a more environmentally friendly future if it means giving up a load of profits. There is an argument that this is where a company chief executive should lead, and tell his or her investors that this is the path they are taking one way or another. But in practice, few chief executives are willing to take that risk.
The green transition has a chance only if companies and shareholders are willing to take a financial hit in the short term. It’s increasingly clear that is not the case.
