by NEI Investments.
Seizing opportunities for low-carbon leadership.
Editor’s note: This article first appeared in our Active Ownership Report from Q4, 2021.
Teck Resources is demonstrating strong leadership on many fronts as they continue to orient their business toward a low-carbon world. Our meeting in November brought in four members of the board, including the chair, which we take as a great sign of commitment to climate strategy and to the value of corporate dialogue. Teck has a female board chair, a welcome rarity in the mining industry.
The overwhelming message we took away is that Teck is seizing the opportunities offered them as a provider of key minerals required to achieve net zero. They have identified climate change as the key risk of our time, with climate considerations now a regular aspect of all strategy sessions.
Teck continues to focus on copper as a mineral that’s essential to a low-carbon reality. We talked about their plan for metallurgical coal, a critical ingredient of steelmaking. Teck recognizes it would be detrimental to the transition for them to sell the assets to a buyer who might not have the same commitment to net-zero (or the same resources to address legacy pollution issues); instead, they are looking at solutions for ensuring the coal is part of the transition. Teck had an opportunity two years ago to expand their Cardinal River coal operations but the project’s incompatibility with their climate strategy was a large reason they chose to not proceed with it. Rather than selling the asset, they wound it down. Teck is closely following the development of new technologies such as hydrogen and carbon capture, utilization, and storage, as the world seeks to decarbonize steel production.
The board is contemplating how to tie long-term incentive plans to their ESG progress, specifically climate. Those considerations already form part of the company’s annual bonus structure. This is an area where we suggested they develop better sightlines, so they can determine how progress toward net zero plays into compensation. Teck is also exploring whether and how they might be able to influence the downstream use of their products for greater sustainability.
It must be acknowledged that Teck has significant environmental challenges in B.C. that it continues to address, in particular the legacy of selenium pollution linked to its metallurgical coal mines. But in our view, they are on a promising trajectory and should be considered leaders in the transition to a low-carbon future.
Next steps: The Climate Action 100+ collaborative is currently benchmarking the company’s activities against the CA100+ framework. We will meet with management once that project is complete, likely in the spring. The benchmarking effort will give us insight into areas where Teck may need improvement.
As of December 31, 2021, Teck Resources was held in NEI Canadian Bond Fund, NEI Growth & Income Fund, NEI Canadian Equity Fund, NEI Canadian Dividend Fund, NEI Fixed Income Pool, and NEI ESG Canadian Enhanced Index Fund. Holdings are subject to change without notice.
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