JP Morgan, one of the world’s leading financial institutions, has reportedly invested up to $250 million in mining giant Glencore through its various “sustainability” funds, raising concerns over the bank’s adherence to environmental, social, and governance (ESG) principles. Despite Glencore being a major coal producer, including substantial operations in South Africa, the investment is being classified under sustainability funds due to Glencore’s revenues from thermal coal being below the 20% threshold that JP Morgan mandates for its sustainable investments.
The ESG sector, which encompasses investments focused on positive social and environmental outcomes, has grown rapidly, with assets in these funds projected to exceed $40 trillion by 2030. However, the classification of investments as “sustainable” has come under scrutiny, particularly regarding the rules governing ESG funds.
An investigation by the Bureau of Investigative Journalism (TBIJ) reveals that JP Morgan, the largest bank outside China, is using its sustainability funds to back Glencore, despite the company’s coal operations being linked to significant environmental concerns. These include ongoing environmental breaches at Glencore’s South African coal mines, where pollution and hazardous waste storage have drawn legal challenges and complaints from local environmental groups.
While Glencore, the world’s largest exporter of thermal coal, falls within JP Morgan’s sustainability criteria due to its coal-related revenue being under 20%, its coal operations account for nearly half of its profits. In 2022, the company generated a record $18.6 billion in profits from coal, raising questions about the true environmental impact of such investments under the ESG banner.
Jakob Thomä, CEO of climate think tank Theia Finance Labs, criticized the sustainability claims, stating that retail investors would likely feel misled by such criteria. He also suggested that some ESG funds may violate EU laws, which prohibit misleading commercial practices.
In August 2024, Glencore abandoned plans to divest from its coal operations following shareholder pressure. Despite initial promises to scale back its coal mining operations by 2035, the company has opted to retain its fossil fuel assets, which remain a key source of cash flow.
Environmental and human rights groups have expressed anger over Glencore’s operations. The company’s Tweefontein coal mine in South Africa has faced repeated accusations of environmental violations, including contamination of local waterways and poor waste management practices. Glencore’s other operations, such as the Cerrejón mine in Colombia, have also been linked to human rights abuses and environmental harm.
Glencore has defended its actions, claiming a commitment to responsible operations and engagement with local communities, pointing to measures like a water treatment plant at its South African operations. However, critics argue that the company’s environmental and social impact often goes unreported and is not fully accounted for by investors.
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