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Corporate eco-activists raise the stakes

3 April 2021

9:00 AM

3 April 2021

9:00 AM

‘Little more than market hype, PR spin and disingenuous promises’. Last week’s Economist magazine featured this dismissal of corporate environmental pledges by the former head of sustainability at Blackrock, the world’s biggest climate-obsessed asset manager, concluding that the heavy pressure on the corporate world from activist bodies like Climate Action has resulted in ‘corporate pledges coming thick and fast…[but these] do not seem to result in much change’.

But don’t write off the eco-activists. Mounting pressure on corporate boards to bow to environmental demands has brought some significant victories as this coalition of global institutional investors aims to force companies to reduce their carbon emissions. Australian institutional investors supporting ‘Climate Action 100+’ include AustralianSuper and Cbus, industry superannuation funds with active environmental and social agendas that are never put to members for approval. Climate Action has assessed the decarbonisation pledges and strategies of 167 firms that account for 80 per cent of the world’s industrial emissions, including 12 Australian companies, and will push companies on its ‘decarbonisation’ list to align their capital spending with their emissions reduction pledges. Corporate Australia’s heaviest emitters, it claims, are not spending the money required for them to hit their pledges of cutting greenhouse gases and achieve ‘net zero’ emissions, with none of them disclosing how it will align future investment decisions with its stated emissions-reduction aims – which in any event fail to be fully aligned with the goals of the Paris Agreement to limit global warming. So Climate Action will raise demands for more aggressive targets to be set.

This month’s AGM in London of Australia’s biggest iron ore miner, Rio Tinto, will see another win for  environmentalists just one month after the miner made a major U-turn in its stance on customer, or scope 3, emissions, reversing an earlier position that it had no control over how steelmakers used the iron ore it mines. Now the company’s board of directors has succumbed to activist pressure to endorse the same climate-related resolution it successfully opposed at last year’s AGM (but which nevertheless received 37 per cent shareholder support). Green operative Market Forces will now have board support for a motion to disclose short-, medium- and long-term targets for greenhouse gas (GHG) emissions from its own operations, as well as its performance against those targets. To tackle scope 3 (customer) emissions that account for the bulk of its carbon footprint, Rio said last month it would work with its customers to reduce steel-making carbon intensity by at least 30 per cent by 2030 and also aim for carbon-neutral steel production by 2050.

The second Rio resolution, from the Australasian Centre for Corporate Responsibility, calls on Rio to review its membership of industry associations for any inconsistency with the Paris Agreement goal – clearly aimed at the Minerals Council of Australia’s support for coal mining. This may become a lively issue now that the MCA has shown some renewed life (after being effectively emasculated by BHP’s previous woke leadership) in making a strong submission to the EU criticising its tax proposals favouring solar, wind and bio-fuels over nuclear and carbon capture and storage, both of which affect Australia.

But the most striking environmental disagreement is between two of the world’s big-four iron ore miners – Fortescue Metals and BHP. They have set out on such fundamentally different courses that both cannot be right. Fortescue Metal Group’s one third-owner (and Australia’s richest man) Twiggy Forest has gone so green he not only intends Fortescue to be carbon-neutral by the end of the current decade, but also to produce green steel in Australia (he wants us to make 10 per cent of the world’s steel) and to become a major green hydrogen and electricity producer on a global scale, which could eventually surpass Fortescue’s iron ore business. And who better to be chairman of this future industries arm than former PM and eco-warrior Malcolm Turnbull?

‘We aim to start building Australia’s first green-steel pilot plant this year, with a commercial plant in the Pilbara, powered entirely by green electricity from wind and solar, in the next few years,’ says Forrest. According to last weekend’s Guardian, some of Forrest’s goals will be tested in the short-term. In a speech to a Credit Suisse investment conference last week, he said that by 30 June this year the company will have developed a green iron ore train that either runs on renewable electricity or a combustion engine powered by green ammonia. He also plans to be trialling a ship run on green ammonia. He first revealed the Fortescue steel-making plans in January on the ABC, saying it was no longer a pipedream, because enterprising businesses around the world, such as Thyssenkrupp in Germany and Japan’s Nippon Steel, were already figuring out the technology; one option was to replace coal in the furnace with green hydrogen while the other, more radical, approach was to scrap the blast furnace and ‘just zap the iron ore with renewable electricity’. Forrest is trialling both methods. But Fortescue will need to do a lot better with these ventures than in its $US3 billion (and rising) Iron Bridge magnetite project which is ‘under review’ after the departure in February of Fortescue’s COO and two directors when the company ‘lost sight of its values and culture’ – especially as Forrest is relying on his ‘record’ to promote his grand schemes.

There is none of this green adventurism in Mike Henry’s plans for BHP. He is sticking to its portfolio of products (iron ore, copper, nickel) that stand to benefit from the trend to renewables – along with his fossil fuels oil and metalliferous coal. BHP, like Australia’s largest iron ore miner, Rio Tinto, is targeting net zero emissions from its own operations but not until 2050, and has firmly determined against setting up its own local ‘green steel’ facility (‘it is certainly not a focus for BHP’) and Henry is adamant that renewable energy is ‘certainly not going to be a new standalone business for BHP’. On the prospects of hydrogen replacing coke in ‘green’ steelmaking, Henry is on the record saying, ‘we do not have the capabilities to build and operate [one] and we do not see the returns as being there certainly in the foreseeable future. Our analysis suggests that blast furnace iron making, which depends on coke made from metallurgical coal, is unlikely to be displaced at scale by emergent technologies this half century’.

But if BHP has successfully emerged under the pragmatic Mike Henry from the  green-dominated and PC years of his predecessor as CEO, Andrew Mackenzie, the troubled and emissions-slashing Royal Dutch Shell has appointed Mackenzie as its new chairman, with Bloomberg describing him as being ‘ahead of the curve on climate change and gender issues’ and whose first announcement was that its board, for the first time, would have as many women as men.

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