19 November 2021
Coal miner New Hope Corporation’s 2021 AGM descended into farce yesterday, with technology issues compounding upon the company’s evasive approach to shareholder accountability.
Despite this, New Hope’s board still found time to double-down on its commitment to climate-wrecking coal, admitting New Hope intends to continue deriving around 95% of its revenue from coal by 2030.
The conduct of this AGM, and the company’s environmentally reckless pursuit of new coal projects should cause investors to reconsider their financial support for New Hope.
No plans to diversify beyond coal
Despite New Hope’s annual reports touting its credentials as a “diverse” energy company, the reality is that around 95% of New Hope’s revenue is derived from climate-wrecking coal.
New Hope is betting on coal being a significant part of the energy mix for decades to come. The company’s existing Bengalla coal mine is slated to operate until 2039, with the New Acland Stage 3 expansion proposed to continue operations at that mine for a further 12 years. In addition to these two mines, the company has assessed a further 231 million tonnes of marketable coal reserves at its Lenton, Elimatta and Taroom exploration sites.
New Hope’s coal mining plans are completely inconsistent with what is required to limit global warming to the Paris Agreement goal of 1.5ºC. To do so, scientists state that 95% of Australia’s coal must remain unburned.
Despite this, New Hope’s Chairman confirmed to the AGM that it is the company’s intention to continue sourcing around 95% of its revenue from thermal coal by 2030. These statements yet again underscore New Hope’s environmentally reckless pursuit of coal at the expense of limiting global warming to 1.5ºC.
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Ignoring net zero by 2050 scenarios
New Hope’s 2021 Sustainability Report was published less than 24 hours before the AGM, giving shareholders very little time to scrutinise its contents. Nevertheless, one clear problem with the document was the company’s continued refusal to consider the effect of a net zero emissions by 2050 scenario on its business.
For years, fossil fuel companies like New Hope have relied on International Energy Agency (IEA) energy demand scenarios aligned with catastrophic global warming to justify their business plans. Yet in May this year, the IEA caught many of these same companies off-guard with its landmark Net Zero Emissions by 2050 scenario. That scenario is designed to achieve a 50% chance of limiting global warming to 1.5ºC and sets out clear timelines for the end of coal. Specifically, the IEA states that achieving net zero emissions by 2050 means “no new coal mines or extensions”.
However, in a total failure of climate risk management, New Hope did not refer to the net zero scenario even once in its 2021 Sustainability Report. Instead, New Hope refers only to the IEA’s Stated Policies Scenario (consistent with around 2.7ºC of global warming) and Sustainable Development Scenario (consistent with global net zero emissions by 2070).
This is despite almost 80% of New Hope’s current customers being situated in countries with net zero by 2050 commitments. If these commitments are realised then the markets for New Hope’s coal will almost completely evaporate.
Poor governance persists
New Hope’s 2021 AGM was a masterclass in how not to run an online meeting. Repeated technology issues meant that some shareholders were not able to ask the company questions. Question time during the AGM was itself bizarre, with many questions receiving indirect or evasive answers. To cap it off, the company published its latest quarterly report a mere 20 minutes before the AGM commenced, giving shareholders little time to apply proper scrutiny.
These issues reflect very poorly on New Hope’s corporate governance. They reinforce the perception that this company holds little regard for transparency or the rights of shareholders to hold the board to account.
In an apparent reflection of the company’s poor governance, strong votes against New Hope’s remuneration report and the re-election of directors were recorded. Over 10% of the company voted against the company’s proposed remuneration report, which is a substantial poll given that almost 40% of New Hope’s investor base is owned by Washington H Soul Pattinson Ltd (WHSP). Further, over 27% of shareholders voted against the re-election of director Todd Barlow, suggesting strong dissatisfaction within the company’s investor base about its management.
Meanwhile, almost 10% of the company backed a Market Forces coordinated resolution calling on the company to manage down its coal operations consistent with a net zero by 2050 scenario. This represents a more than doubling of a similar resolution last year and shows increasing frustration within the company about its management of climate risk.
Taking out the 40% WHSP holding, some 15% of remaining shareholders demanded the company drop its expansion plans, and wind up production in line with a net zero by 2050 pathway. However, many big investors with their own net zero commitments will have failed to support this critica resolution, destroying the credibility of their climate claims.
Combined, these results set the scene for a potential showdown at next year’s AGM, should the company continue to ignore the desire of shareholders for better disclosure of its management of climate risks and greater accountability overall.