The days when big miners like BHP Billiton (NYSE:BHP), Rio Tinto (OTCPK:RTPPF) and Glencore Plc (OTCPK:GLCNF) could make heavy investments in the oil and gas business and only appease green-tinged investors by making half-hearted divestments are numbered.
With ESG investing rapidly gaining momentum and climate change goals looming, mining companies are being forced to align capital spending with their emissions reduction pledges, with activist and institutional investors sometimes demanding sale of entire fossil fuel portfolios.
Three years ago, Rio Tinto did the seemingly unthinkable by selling its entire portfolio of thermal coals in Queensland, Australia. Rio sold its Coal & Allied business to, ironically, Glencore for nearly $1.7B and its interest in the Kestrel underground coal mine to a consortium comprising private equity manager EMR Capital and PT Adaro Energy Tbk for $2.25 billion.
The sale of the mine made Rio the only major global company with zero coal assets.
As the world’s largest mining company, Glencore’s approach to fossil fuel assets has been retaining and gradually “managing down” the assets toward the net-zero horizon in 2050. On the other hand, the world’s second-largest mining company, BHP, has been more ruthless in distancing itself from oil and gas though, ironically again, some activist investors want it to slow the tempo.