What Glencore's Coal Reversal Means for the Industry

Glencore has decided not to spin off its coal business, reversing its previous plan due to changing investor sentiment. The company maintains that while Environmental, Social and Governance (ESG) concerns are significant, fossil fuels are still essential during the transition to renewable energy. This decision highlights the ongoing debate among major miners and investors about balancing ESG goals with profitability.[i]   

Coal's Role in Energy Production

Coal remains a dominant energy source, responsible for 35.5% of global electricity in 2023. Despite environmental concerns, demand continues to rise.[ii]

Glencore's Strategic Reversal

Initially planning to spin off its coal business, Glencore reversed this decision due to a changing investment landscape. Glencore’s CEO Gary Nagle emphasized the ongoing necessity of fossil fuels during the energy transition, stating,

“There’s an understanding that energy is required today as we transition to a decarbonized future, and it has to come from fossil fuels in many cases.”

This appears to highlight Glencore's strategic adaptation to market realities and investor expectations amidst the global energy transition.

The Ongoing Coal Debate

Despite controversies, Glencore argues responsible coal management is essential for developing economies. The debate highlights the clash between ESG goals and financial returns. Nagle pointed out a significant shift in investor sentiment, noting that support for Glencore's climate strategy jumped from about 70% to over 90% at the annual shareholders' meeting in May.

Additionally, “The Climate Change News” reported that EU-regulated green funds have invested at least $65 million in coal companies in nations like China and India. These investments, managed by top firms like BlackRock and Goldman Sachs, are found in funds marketed as environmentally friendly. [iii]

Implications for Future Energy

We believe Glencore’s decision underscores the importance of fossil fuels during the energy transition and reflects broader industry challenges in balancing sustainable growth with profitability. The persistence of coal in Glencore’s strategy highlights its complex role in the global energy landscape, as the company navigates investor sentiment and the demand for energy in developing regions.
 

How May Investors Gain Exposure to Companies in the Coal Industry?

The Range Global Coal Index ETF

The Range Global Coal Index ETF (COAL) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the Range Global Coal Index. The Index aims to track the performance of a portfolio of stocks that are involved in the met and thermal coal industry.

*Please note Glencore currently makes up an approximately 4.07% position in the COAL ETF as of 8/22/2024. Holdings are subject to change. A full list of positions is available at the fund’s website: www.rangeetfs.com/coal

[i] Financial Times. (2024, August 8). Glencore reverses coal spin-off plan amid changing investor sentiment. Financial Times. https://www.ft.com/content/558122f6-d78d-4330-874d-64df5770a213
[ii] Share of Electricity Generated by Coal, Our World in Data, 6/20/24
[iii] Climate Home News. (2024, July 1). EU green funds invest millions in expanding coal giants in China, India. Climate Home News. https://www.climatechangenews.com/2024/07/01/eu-green-funds-invest-millions-in-expanding-coal-giants-in-china-india/

Carefully consider the Fund's investment objectives, risk factors, charges and expenses before investing. This and additional information can be found in the Fund's full or summary prospectus, which may be obtained by visiting www.rangeetfs.com/coal. Read it carefully before investing or sending money.

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Investing involves risk, including possible loss of principal. There is no guarantee the Fund will achieve its stated investment objectives.

The Fund is non-diversified. Its concentration in an industry or sector can increase the impact of, and potential losses associated with, the risks from investing in those industries/sectors.

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