Our engagement
As part of Fidelity’s thermal coal thematic, we seek to engage intensively with thermal coal miners that generate material revenue from thermal coal mining, commit to expand thermal coal capacity beyond their existing commitments or are assessed by the Climate Rating as having no evidence of transition potential.
At the start of our engagement, Whitehaven Coal was a pure-play thermal coal miner generating around 80% of its revenue from thermal coal sales. In addition, the company had committed to expanding production at existing brownfield mines as well as pursuing greenfield development at its Vickery mine site. When we engaged with the company on these issues, Whitehaven highlighted that while it did not plan to cease production growth in thermal coal, it was seeking to diversify its portfolio away from thermal coal into metallurgical coal.
In October, Whitehaven announced the acquisition of two metallurgical coal assets from BHP, Daunia and Blackwater assets, which would immediately shift its revenue exposure from 80/20% thermal coal to metallurgical coal to a 30/70% split, post-acquisition. While we viewed the acquisitions as a positive step to diversify Whitehaven’s business model away from thermal coal, the business’s underlying revenue and production profile derived from thermal coal is still meaningful.
In addition, post the acquisition, Whitehaven did not provide more clarity on its approach to Vickery, its largest greenfield project, and whether it would reduce its expansion plans. In addition to production growth, Fidelity is also focused on companies committing to phasing out sales of thermal coal to end-users that do not have climate targets or abatement strategies. As a result, we encouraged Whitehaven to adopt a responsible approach to the sale of its thermal coal volumes and improve the disclosure of its end customers’ abatement plans and net zero targets.
Whitehaven currently discloses this detail at the country level, but we encouraged it to disclose it at the customer level and provide greater detail on its abatement plans. With this information we will then be able to engage on and encourage that volumes sold by miners go to customers such as power generation players, that have abatement plans in place to decarbonise the energy system.
Additionally, in line with our proxy voting policy, we encouraged the company to set emission reduction targets, otherwise this would result in a vote against a director of the company.
