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Glencore share price dived amid ESG concerns: buy the dip?

By:
on Jan 5, 2023
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  • Glencore stock price crashed to the lowest point since November.
  • The company’s shareholders raised concerns about its coal business.
  • They warn that the company’s business does not align with Paris agreement.

Glencore (LON: GLEN) share price has had a difficult start to 2023 as concerns about the company’s ESG credentials rose. The blue-chip mining stock plunged to a low of 503.3p, which was the lowest level since November 22. It has dropped by more than 12% from the highest level in December.

Glencore’s ESG concerns

Glencore had a superb performance in 2022 as the company benefited substantially from the business it does. Precisely, the company benefited from the war in Ukraine, which disrupted the global energy sector because of the role that Russia plays.

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The most important energy news was that Russia reduced the amount of natural gas that it sends to Europe, as we wrote here. As a result, European countries that were leading in energy transition announced that they were restarting their plants. 

This trend helped push Glencore to a cash printing frenzy because of its strong coal business, which the company has rightly resisted to spin off. Glencore argues that spinning the coal business will not solve the climate crisis. For example, Thongela Resources still mines and sells coal after it was spun off by Anglo American.

Shareholder revolt

Glencore share price dropped sharply after a group of shareholders filed a resolution that questioned the company’s climate impact. It is led by a team of shareholders like Legal & General and HSBC Asset Management. The investors questioned whether the company’s coal business aligned with Paris climate agreement.

Glencore’s coal business is highly profitable. In the first half of the year, the division contributed $8.9 billion to the company’s earnings. As part of its climate plans, Glencore has said that it will cap coal production to about 150 million tons a year.

Some analysts believe that Glencore should resist activist and investor pressure. While climate change is a big issue, the reality is that the world will still need coal. Germany and other European countries that embraced wind and solar have all reverted to natural gas and coal. 

Glencore share price forecast

Glencore share price
GLEN chart by TradingView

The daily chart shows that Glencore stock price made a deep dive after the latest shareholder revolt on ESG concerns. As the shares dropped, they moved below the lower side of the ascending channel that is shown in red. 

It has moved below the 50-day moving average while the Relative Strength Index (RSI) dipped below the neutral point. Therefore, at this stage, the outlook of Glencore is bearish, with the next key level to watch will be at 450p. In the long term, however, the stock will continue doing well because of its strength in coal, copper, and other metals used in EV manufacture.