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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With a takeover lurking in the wings, the company must now figure out how to transition out of its 20-million-tonnes-a-year coal business. 

The proposed takeover of Vancouver-based Teck, a company recognized as a sustainability leader, by Swiss mining giant Glencore PLC, a company saddled with a history of human rights, bribery and environmental problems, has attracted the attention of Prime Minister Justin Trudeau. The government is looking at the deal “very, very carefully,” he told Bloomberg last week.  

“We have high and stringent expectations, not just on environmental issues but on partnership with Indigenous Peoples,” he said. 

At stake in the takeover battle is control of Teck’s copper and other mineral operations that are critical for the global climate transition. Demand for copper, essential for electricity-based infrastructure such as wind turbines, solar panels and power grids, is expected to skyrocket in the shift away from fossil fuels. 

But Teck’s board rebuffed Glencore’s US$23-billion merger offer and pledged to move forward with a previously announced plan to split the company into two separate entities, one focused on its critical mineral assets and the other on its steelmaking coal field in Elk Valley, B.C. The move would have insulated Teck from the negative environmental effects of its coal arm while still allowing it to reap millions in revenue to finance expansion of its green metals business.  

Ultimately, Teck failed to receive enough shareholder support for the split in a vote last week and withdrew its proposal. Glencore then said it would be willing to consider a better takeover offer, threatening to make a hostile bid direct to investors if the board refused to negotiate.  

For now, the dispute rests with the Teck board. 

Coal mines a big CO2 emitter

The biggest issue Teck will have to grapple with, regardless of whether it stays independent of Glencore, is the future of its coalfield in the Rocky Mountains of southeastern B.C. The field is made up of four sprawling open-pit mines producing metallurgical coal, which is used to make steel. 

The coal mines make Teck the second-largest ship-based exporter of metallurgical coal in the world. In 2022, Teck produced 21.5 million tonnes of coal, generating more than $10 billion of the company’s $17.3 billion in revenue. The majority of the coal is shipped from B.C. ports to steel companies in China, India and other Asian countries.  

According to Teck’s sustainability report, the Elk Valley operations emitted 2.85 million tonnes of greenhouse gas in 2022 in direct (Scope 1 and 2) emissions (0.4% of all reported emissions in Canada). When it’s burned to make steel, the total lifecycle emissions from Teck’s coal add up to 65 million tonnes per year — the equivalent of a tenth of Canada’s total emissions. (Most of these emissions don’t officially count against Canada’s greenhouse gas inventory – under international accounting rules, they count in the countries where the coal is consumed.)

 In addition to their heavy CO2 footprint, the Elk Valley mines are under provincial orders to manage the tough environmental problem of selenium leaching into local waterways. High levels of selenium, a naturally occurring substance, have damaged fish populations by lowering their reproductive success. Selenium levels are elevated by rain and snow runoff from large piles of rock moved from mountaintops at the open-pit mines, which makes the substance difficult to control. 

Teck recently spent $1.2 billion to remove selenium from its runoff, but heavy levels remain in the region’s waterways. According to an investigation by The Narwhal, there are no viable ways to stop selenium from leaching into local waters. 

In the vote last week, Teck received more than 50% support for its proposal to split the coal and critical minerals assets, but it failed to receive the necessary votes for it to be approved. (The move required the support of two-thirds of Class A and B shareholders.) 

Under the proposed arrangement (which has now been withdrawn), the coal assets would have been turned over to a new company, Elk Valley Resources, which would have paid Teck 90% of its cash flow for up to 11 years. Under the deal, Teck would no longer be responsible for the company’s CO2 and selenium emissions, and yet it would still benefit by taking on billions of dollars in Elk Valley revenue, which would be invested in Teck’s remaining copper and critical mineral operations. 

Why investors rejected Teck Resource’s proposal

Writing before last week’s vote, Globe and Mail columnist Eric Reguly didn’t mince words, calling the proposal to split the company blatant greenwashing. 

“Teck unveiled a have-your-cake-and-eat-it-too deal that makes a mockery of the environmental, social and corporate governance [ESG] strategy that had been pushing the resource industry to get rid of its dirtiest products,” he wrote. 

Teck recognizes that investors are turning away from coal because of its climate impact. Thermal coal – the kind mined by Glencore – used for electricity generation is the main culprit, but metallurgical coal is also targeted, albeit to a lesser extent, as the global steel industry begins to embrace green steelmaking. 

U.S. steelmakers already primarily use scrap rather than iron for their feedstock, which avoids the need to use coal. In Canada, Algoma and ArcelorMittal Dofasco are phasing out their coal-burning blast furnaces, while many European producers are going a step further and switching to emission-free hydrogen-based production. 

So where does this leave Teck? 

George Cheveley, portfolio manager at London-based asset manager Ninety One, told Reuters that Teck needs to develop a clear transition plan for Elk Valley. “This needs to be a credible plan as well and, whilst it can be longer term, it needs to demonstrate how they can support decarbonization.” 

The failure of the plan to divide the company may open the door to Glencore’s takeover, but it’s also clear that the government – which holds the power to reject takeover deals under the Investment Canada Act – is looking for strong environmental and Indigenous community benefits. Teck is the major employer in the Elk Valley region, with thousands of people on its direct payroll and thousands of spinoff jobs dependent on its mines. It also provides major benefits to the Ktunaxa Nation, which has an impact management agreement with Teck, one of the most comprehensive Indigenous benefit agreements in Canada.  

The major challenge that Teck now faces is how to transition out of its Elk Valley mines while also maintaining support for its local communities. It’s in uncharted territory. Phasing out an operation responsible for the bulk of a company’s profit is something that no management group wants to contemplate. 

In spite of its climate and environmental problems, Teck is considered an ESG leader in the mining industry in part because of its transparency. Now it faces the greatest ESG challenge of all – shifting from a coal company to a business focused on the climate transition. 

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

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Over nearly a decade and a half of writing a weekly column and several books under the Ecoholic banner, I ranked endless streams of products from worst to best in terms of planetary impact, from beer companies to banks, footwear to ethical funds. Many weeks, judging the environmental and social costs of, say, a bar of soap was often tough. Evaluating the sustainability of an entire publicly-traded multi-billion-dollar corporation is, well, a whole different ball game.

Corporate Knights magazine (which I’ve just joined as managing online editor) has a crack team of researchers and data scientists that have developed a complex methodology for doing just that. Roughly 7,500 publicly-traded corporations with revenues of over a billion a year are ranked against their peers for carbon/water/energy/waste productivity, VOC and other emissions, supply chain sustainability scores, clean revenue, as well a bunch of social and governance indicators like percentage of taxes paid, how many women are in leadership positions and the ratio of CEO-to- average-worker pay. Nearly every year, more criteria are added, old ones are tweaked and screens are beefed up (including adding animal welfare) to more accurately assess the world’s corporate sustainability champs.

As part of a 14-year running experiment since the Global 100’s founding in 2005, the ranking also exists as an index (ticker: CKG100), whose financial performance is measured against its comparator stock market index, the MSCI All Country World Index. This brings in real-time data to test Corporate Knights’ hypothesis that companies that do better for the world can also do well by shareholders (in case you were wondering, the Global 100 is ahead 127% to 118% on net investment returns).

A few sub-sectors are excluded from the get-go (weapons, tobacco and thermal coal among them), but overall the ranking is sector agnostic. That means there are companies on the list that are bound to raise some eyebrows. There’s no denying that big oil, big pharma and big banks aren’t everyone’s vision of sustainability superstars.

Many people are still smarting at the big U.S. banks, which seemed to get off scot-free after their role in causing the great financial crisis in 2008. Bank of America, for instance, was listed at #2 on a list of America’s most hated banks, according to the number of customer complaints. Nevertheless, the same bank placed 63 on the Global 100 because it’s providing billions of dollars of financing for the low-carbon economy, it offers a solid pension plan for its workers and has relatively impressive gender diversity on its board, where a third of directors are women.

Most of the biopharmaceutical companies on the list this year turned up because they’re more transparent than their 376 peers in disclosing the percentage of their designated priority drugs that are priced equitably. That doesn’t, however, mean all their drugs are affordable. Three of the pharmaceutical manufacturers on this year’s Global 100 list –Novo Nordisk (#58), Eli Lilly (#46) and Sanofi (#20)– are, according to the L.A. times, currently facing “several state investigations and a lawsuit that accuses them of conspiring to drive up insulin prices” to the point that some diabetics are reportedly quite dangerously rationing them. All three companies have denied the charge of price fixing.

By far the most polarizing companies on the list are those connected to the oil and gas sector.

Corporate Knights has come under increasing pressure over the years to exclude oil and gas companies from the Global 100. Just last week, Seb Beloe, a partner with WHEB Asset Management, tweeted that “in a world hurtling towards >2º of warming, no oil and gas companies should be described as the ‘world’s most sustainable.’”

So why does Corporate Knights include them? It’s a fair question. At this point, CK’s Global 100 does exclude oil and gas companies that have abysmal anti-climate lobbying records based on research by Influence Map (that means no ExxonMobil, Chevron or Phillips 66). It also screens out those significantly invested in repressive regimes (like Marathon Oil in Equatorial Guinea), as well as those slammed with heavy corporate fines and penalties (BP). And CK now combines its Global 100 sector slots for Utilities and Energy companies, which has had the effect of squeezing out most energy companies in favour of generally higher-scoring utilities.

Corporate Knights’ research has actually helped to underpin the economic case for fossil fuel divestment in Ireland and elsewhere. But like much of the responsible investment community, the Global 100 maintains a best-in-sector lens. This year, Suncor and Total topped the integrated oil and gas sector largely because they earn roughly one per cent of their revenue from cleaner sources (think wind farms and biofuels). It doesn’t sound like a big number, but it’s enough to beat out peers like BP and Shell. Total has committed to ramping up its renewables business as have other oil majors, so the bar for leadership should be considerably higher than one per cent in the future.

In the mining sector, Teck was the top-ranked company in the world this year partly because of  its carbon productivity scores and pension plan quality, though most of its points came from its growing mix of metals that are essential to the low-carbon economy. Copper (critical in electric cars) and zinc now account for half the company’s revenues.

But in a world where the International Panel on Climate Change has recently ratcheted up its calls for drastic carbon emission cuts over the next 12 years and the financial outlook for oil is increasingly uncertain, large oil sands projects like the one being proposed by Teck Resources do raise more questions with regulators, economists and rankers alike. While Teck Resources says that emissions from its first solo venture into oil (the proposed 260,000 barrel per day Frontier mine) would be “best-in-class,” Environment and Climate Change Canada has countered that the project’s emissions would be “approximately 25 per cent higher than Alberta’s best-in-class facility.”

The ultimate answer will undoubtedly affect future rankings. Andrew Grant, a senior analyst with Carbon Tracker (the outfit that helped to convince the Bank of England of the gravity of the energy transition and stranded assets risks), shared his reservations with Corporate Knights, “If the world is successful in limiting global warming to less than 2ºC, or indeed anywhere near, sanctioning this project seems likely to hurt investors as well as the environment.”

Will oil- and gas-involved firms take a page out of the Neste and Ørsted playbook and make a deeper shift towards the low carbon economy and clean energy? Corporate Knights’ upcoming Global Corporate Green Investment report points out that “leaders who hail from the oil and gas sector, such as Ørsted A/S and Neste Oyj, with clean revenue percentages of 58% and 25% respectively, have demonstrated that diversifying beyond fossil fuels is possible and profitable.”

They’re not just profitable, they’re knocking it out of the park. Since the public listing of DONG Energy (now Ørsted) in June of 2016 to January 24, 2019, the two fossil fuel companies that have made the biggest bets on going green (Dong/ Ørsted and Neste) have also respectively returned nine and 15 times more green to investors than the typical oil and gas company.  “What’s even more impressive is that outperformance happened during a period of mildly rising oil prices,” says Corporate Knights CEO and editor-in-chief Toby Heaps, who hopes the Global 100 can “serve to inspire fossil fuel companies to reinvent themselves to serve a low carbon world.”

No doubt the debate over whether CK should remove oil and gas companies from the Global 100 will remain lively both outside and inside our offices. In the meantime, Corporate Knights will be watching closely to see how resource companies grapple with decisions that won’t only impact their future but the planet’s.

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