Investors key to net zero transition
Jefferies thinks "net zero" will likely be the
next formulation of ESG investing, which is focused on environmental, social
and governance considerations and has been acknowledged by the mining sector.
"If corporates want to be in good stead with
shareholders, they must address ESG issues appropriately or their cost of
equity will rise," Corker told a lunch hosted by the US-based investment
bank as part of its inaugural Net Zero Summit.
"Second, investments can lead to additional
technological breakthroughs, and in order to meet the goals of the Paris
Climate Agreement, massive capital mobilisation is required."
He argued investors were the most powerful force in the
transition to carbon neutrality and must utilise this power.
The net zero transition represented a plus-US$1 trillion
incremental investment opportunity in the US alone, Jefferies said citing
International Energy Agency figures.
Jefferies noted mining companies in general were taking
action to reduce their carbon footprint, although many had been found lagging
on Paris climate goals.
It said Glencore stood out as it was the only major miner
committed to fully comply with the Paris Agreement on Scope 1+2+3 emissions.
"This may be surprising to some investors as Glencore
is one of the world's largest producers of thermal coal, but it is also
evidence that Glencore is willing to significantly change the way it operates
in order to position the business to benefit from decarbonisation,"
analyst Christopher LaFemina said in a note yesterday after a fireside chat
with Anna Krutikov, Glencore's head of sustainable development.
He noted while Glencore was likely to make significant
operational improvements to reduce its carbon footprint, it was also
well-positioned to benefit from secular growth in demand for battery materials
and renewable power, being the world's largest producer of cobalt and one of
the world's largest producers of copper and nickel.
"Supply constraints in these metals are significant, in
part due to more stringent environmental permitting for mining projects in
almost all regions," he said.
"We expect higher prices for these metals to lead to
earnings growth for Glencore and other miners, and improved environmental
performance for Glencore should also lead to a higher P/E multiple as the
company emerges as a winner on the path to net zero."
Among its suggestions, Jefferies said "net zero"
investors should not make incremental investments into fossil fuels and should
invest in supply chains to support the decarbonisation transition.
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