But conservation and financial experts say that conditions of the approval are inadequate to protect the Elk Valley in the Rocky Mountains of British Columbia, where the company’s mining operations have for decades released high levels of the mineral selenium from waste rock into local waterways, harming fish populations and raising human health concerns.

“Teck is walking away from an unprecedented environmental disaster, with a windfall of billions of dollars,” says Casey Brennan, conservation director with the B.C. environmental group Wildsight. He says the company has been let off the hook for this water pollution by the decision last week by Innovation Minister François-Philippe Champagne to permit the takeover by Glencore. “It’s a pretty sweet win for Teck to be able to get this approval out of the minister like this with some very limited language that has very unclear legal implications.”

Simon Nicholas, steel industry analyst for the Institute for Energy Economics and Financial Analysis (a global network of energy transition analysts), says it will be difficult for the government to hold Glencore accountable for Teck’s environmental record with its plan to transfer control of the mines to a new coal company. “It’s hard to see this as progress given that Glencore’s intention is to spin off its coal operations,” Nicholas says.

The new company – focusing solely on coal production, in contrast with both Teck and Glencore, which are large diversified mining and metals companies – will face big risks as the world moves away from coal-based steel and power production, raising the possibility it could go out of business before the cleanup costs are met. “There ought to be concerns about whether the new entity will be able to afford long-term rehabilitation,” Nicholas says.

Teck is walking away from an unprecedented environmental disaster, with a windfall of billions of dollars.

– Casey Brennan, Wildsight

The federal approval, announced late last Thursday during a week with major summer holidays in Canada and the United States, was the last hurdle for Glencore and Teck to finalize the deal, expected to close July 11.

Under the approval, Glencore has committed to paying $350 million in rehabilitation and closure activities over five years to reduce selenium pollution in the Elk Valley watershed.

Teck has spent $1.4 billion since 2014 and will spend up to $250 million this year on water treatment. It has also posted a reclamation bond of $1.9 billion with the Government of British Columbia to pay for future environmental liabilities.

According to the B.C. government, Teck’s water treatment facilities are removing only a small fraction of the selenium in the Elk River, especially when spring and summer rains wash large amounts of the mineral into waterways from the man-made mountains of waste rock at the company’s open-pit coal mines. This means that despite Teck’s spending more than $1 billion on water treatment, selenium levels remain more than 200 times higher than what’s considered safe for aquatic life.

Cleanup estimated at $6.4 billion

A consultant commissioned by Wildsight (a conservation organization working extensively in B.C.’s interior) recently estimated the cost of cleaning up the pollution at $6.4 billion, which is almost as high as the total value of the takeover deal at US$6.9 billion.

In his statement announcing approval of the deal, Champagne said Glencore will maintain responsibility for payment of any environmental obligations through to 2050, including if the company is sold to another party. “Glencore’s commitment will result in generational assurance of sound environmental stewardship of the asset, regardless of future ownership,” Champagne said.

Glencore released a list of commitments it is making as conditions of the approval, including promises to maintain Canadian office and staff, donate to community organizations, honour existing agreements between Teck and Indigenous Nations, work with local Indigenous Nations, and increase Indigenous benefits.

The company also pledges to cover Elk Valley environmental obligations over the course of its ownership and potentially beyond. Glencore is committing to obtain prior approval from the minister on a mechanism to cover its obligations if the company is sold, or to continue to stand behind such obligations itself until 2050.

But these assurances don’t satisfy Wildsight, which would have preferred to see upfront reclamation bonds posted in addition to the existing $1.9-billion bond to the provincial B.C. government. “We will continue to press for greater levels of bonding, at least three times higher than what the provincial government is pulling out,” Brennan says. “It really is the only assurance at any level that things will be done and managed properly.”

Brennan says that a decision by the International Joint Commission to investigate pollution in the Elk River watershed could create pressure for a faster cleanup. The issue has become a problem for Prime Minister Justin Trudeau and U.S. President Joe Biden because of objections from the Ktunaxa Nation, an Indigenous community on both sides of the border.

Last week’s decision also contains some stringent guidance on foreign takeovers of critical-minerals businesses, but this was unrelated to the Elk Valley takeover since steelmaking coal is not considered a critical mineral under the new federal rules.

The sale of the Elk Valley mines to Glencore will permit Teck to focus on its copper and critical-minerals businesses which are in high demand with the climate transition, as well as buy back US$2 billion of its own shares. “The large majority of its funds from the sale will be used to buy back shares in order to maximize returns to shareholders and will do nothing for local communities and contaminated waters that they’re leaving behind after billion-dollar profits,” Brennan says.

Eugene Ellmen writes on sustainable business and finance. He is a former executive director of the Canadian Social Investment Organization (now the Responsible Investment Association).

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Swiss-based Glencore plc (GLNCY) is a diversified company with three main segments: metals and minerals, energy and agriculture. The energy division owns mines in Australia, South Africa and Columbia that produced a combined 129.4 million tonnes of coal in 2018, including 118 million tonnes of thermal coal that was burned to generate electricity. The remainder is metallurgical coal that is mostly used to make steel, which makes it more difficult to replace – at least until new steel-making methods are mainstreamed. Overall, coal accounts for roughly 27% of Glencore’s overall profits.

Glencore, like all coal mining companies, is under pressure from investor groups like the Climate Action 100+ signatories to align itself with the low-carbon economy. The company released a statement early this year that showcased its support for the Paris Agreement and promised disclosure to ensure that “investments are aligned with the Paris Goals.” The company promised to limit coal production to 150 million tonnes per year, which is higher than current production levels, and to set a target of reducing greenhouse gas emissions intensity by 5% by 2020 compared to a 2017 baseline. Glencore has promised to release longer-term targets next year. Unfortunately, actions speak louder than press releases.

Glencore is moving ahead with its controversial United Wambo Coal Project in Australia, although the local Independent Planning Council (IPC) has stipulated that any coal exported from the mine can only  go to countries who have ratified the Paris Agreement. Glencore expects this mine to produce about 10 million tonnes of coal per year, which would keep the company below the self-imposed cap of 150 tonnes per year. A company spokesman told The Guardian that “as older mines in our portfolio come to the end of their economic life, all coal projects will be considered.” It’s hard to square these expansion plans with the promise to align investments with the Paris goals, so I’m going to have to rake Glencore over the coals for greenwashing.

Australia-based BHP Group (BHP), formally known as BHP Billiton, is the world’s largest mining company and owns coal mines in Australia and Colombia in addition to other sites that extract iron, copper, nickel and petroleum. BHP produced 72 million tons of coal in 2018, including 29 million tons of thermal coal. Thermal and steel-making coal account for 17% of BHP’s earnings.

Andrew Mackenzie, BHP’s CEO, hinted that the company might divest from coal during an earnings call in August. This followed reports in July that said BHP would be cutting thermal coal production next year. I wouldn’t normally give much stock to this sort of announcement, but I’m smitten by a speech that Mr. Mackenzie gave in London earlier this year about BHP’s response to global warming. “The evidence is abundant: global warming is indisputable,” he said. “The planet will survive. Many species may not.” These are striking words from a coal mining CEO.

BHP announced a short-term target to keep 2022 emissions at 2017 levels, and an ambitious long-term target of net zero operations by mid-century. The company has promised to release medium-term science-based targets next year. I like it when companies put money towards these targets, so I’m happy to see that BHP allocated USD $400 million to their Climate Investment Program with the goal of reducing emissions. A tangible example of this program is a project to replace gas with renewables at their Escondida copper mine in Chile. It’s too early to say how much of a leadership position BHP will earn as the mining industry grapples with climate risk, but I’m cautiously optimistic that they will live up to their promises and avoid the greenwashing trap that so many companies have fallen into. Time will tell whether or not my optimism is warranted.

Both BHP and Glencore extract minerals like nickel and copper that are used in clean energy technologies, so there is some potential upside to owning these mining companies as society transitions to a low-carbon economy. However, both companies have significant exposure to carbon risk (as the Guardian pointed out this week). That risk will keep most sustainable investors away. I’ll give this week’s challenge to BHP by a tiny margin since coal ­­– particularly thermal coal ­– ­­is a lower percentage of their profits. I’m hopeful that BHP will completely divest from their coal holdings and extend its lead, but I’ve been burned too often to take its announcements at face value.

Beta is a measure of a stock’s volatility in relation to the market. By definition, the market has a beta of 1.0, and individual stocks are ranked according to how much they deviate from the market. A stock that swings more than the market over time has a beta above 1.0. Lower beta means less risk.

Have a company in your portfolio that you want to replace with a more sustainable option? Write Tim an email.

Tim Nash blogs as The Sustainable Economist and is the founder of Good Investing.

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The grimy world of coal production brightened briefly in February, when Swiss mining giant Glencore announced it would cap its global production of thermal and coking coal at its current capacity of 150 million tonnes per year. Glencore promised to refocus on metals such as cobalt, nickel, vanadium and zinc, key battery components for a lower-carbon world.

It looked like a coup for Climate Action 100+, a heavyweight group of global institutional investors on a five-year mission to convince the planet’s largest emitters of greenhouse gases to take action on climate change. But is it really a win?

As several industry watchers pointed out, the world’s largest coal producer will benefit most if future supply shortages drive coal prices up. Said Globe and Mail correspondent Eric Reguly: “What looks like a sacrifice for the greater good of the planet comes as no sacrifice to Glencore.”

Despite a slew of coal-fired electricity plants being retired in North America, coal consumption is expected to remain steady as more power stations open throughout Asia. As late as last year, Glencore paid US$1.7 billion for Rio Tinto’s Australian coal assets, virtually locking up the Asian market for seaborne coal.

“You can assume that Glencore’s love affair with coal hasn’t suddenly vanished,” wrote Reguly. He says Glencore has now “peaked out on coal production. It has no capacity to go beyond that.”
Australian resources minister Matt Canavan agreed. “Last year Glencore made one of the biggest purchases of thermal coal assets in history, and now they say no one else should mine coal,” he said. “Call me skeptical, but this sounds like just basic self-interest.”

Still, Climate Action 100+ celebrated Glencore’s climate conversion as a mining-industry first. “Glencore’s commitment to work within the Paris Agreement is a significant step forward,” it announced. “As engagement moves to the next stage, we look forward to working with Glencore and the sector as a whole on reducing emissions across the value chain.”

A key player on the Glencore file was the Church Commissioners, the mission-based investment arm of the Church of England. The US$11 billion fund has been pressuring the company for change since 2013 as part of an effort to shelter the world’s poorest from the full impact of global warming.

“Investors can make a real difference on climate change,” Edward Mason, the Commissioners’ head of responsible investment, told the Sydney Morning Herald. “In the long term the ethical and the financial align on this issue, because there aren’t investment returns to be made in a world in which climate change exceeds two degrees or warmer.”

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