BHP unveils five-year US$400m climate investment plan

BHP’s chief executive Andrew Mackenzie unveiled a five-year, US$400 million climate investment program om 23 July, with a commitment to reduce Scope 1, 2 and 3 emissions.

The Australian miner will seek to scale up low-emissions technologies to decarbonise its operations, including investment in nature-based solutions and collective action to reduce Scope 3 (end-use) emissions.

Commenting on BHP’s move, Viktor Tanevski, principal analyst at Wood Mackenzie, said: “A key driver of its climate investment program will see BHP assess its portfolio of products in 2020 and set goals to address Scope 3 emissions.

"In 2018, BHP set a target to cap FY 2022 Scope 1 and 2 emissions at 2017 levels. The 23 July announcement builds on this, but does not clearly quantify reductions.”

BHP’s pledge follows an earlier commitment by Glencore in February this year to also commence reporting on longer-term projections for the intensity reduction of Scope 3 emissions from 2020.

Emissions targets

Tanevski said: “BHP’s announcement to set Scope 3 emissions goals is  in contrast to Rio Tinto. In May, Rio Tinto shareholders followed a board recommendation to vote down a resolution to introduce transition planning disclosure on targets for Scope 3 emissions.

“Rio Tinto’s justification for not setting hard targets was that it has a lack of control over Scope 3 emissions, which lie in the hands of its customers.

"However, Rio Tinto has already completed its exit from coal, while BHP and Glencore still retain large thermal coal operations.”

He added: “BHP’s announcement did not provide any clarity to on the status of its energy coal division. Market rumours about a potential sales process have yet to be formally confirmed by BHP.

"Speculation about a likely exit is mounting following earlier comments that BHP has ‘no appetite for growth in energy coal regardless of asset attractiveness’, with its focus on ‘maximising value to shareholders, whether we are long-term owners or not’.

Output cut

“The timing of BHP’s climate announcement comes only a week after it also significantly cut its near-term outlook of thermal coal production from the Mt Arthur coal mine, in New South Wales.

BHP announced thermal coal production at Mt Arthur in FY20 would fall to a range of 15 million to 17 million tonnes per annum, or 7% to 18% below realised output in FY19.

The cut in output has been pinned on a change in washing strategy to sell more higher-energy coal. There are geological reasons, too, as the mine progresses through the monocline resulting in an increase in overburden removal.

Tanevski added: “We anticipate marketable production from Mt Arthur will fall less than expected to 17.5 million tonnes in calendar 2020 due to an expected recovery in the second half of the year.

"However, should import restrictions in China continue for longer than expected or intensify, further downside to our production outlook would be increasingly likely.”