Wrap Text
GLN: 2020 Annual Report Of Glencore plc
Glencore plc
(Incorporated in Jersey under the Companies (Jersey) Law 1991)
(Registration number 107710)
JSE Share Code: GLN
LSE Share Code: GLEN
HKSE Share Code: 805HK
ISIN: JE00B4T3BW64
LEI: 2138002658CPO9NBH955
Baar, Switzerland
11 March 2021
2020 Annual Report of Glencore plc
Glencore plc (“Glencore” or the “Company”) has today:
published its Annual Report for the year ended 31 December 2020 (“Annual Report”) on its
website www.glencore.com as required by DTR 4.1.3 R and 6.3.5 R; and
submitted a copy of the Annual Report to the Financial Conduct Authority’s (FCA) National
Storage Mechanism in accordance with LR 9.6.1 R.
The Annual Report will shortly be available for inspection on the FCA’s National Storage Mechanism:
fca.org.uk/markets/primary-markets/regulatory-disclosures/national-storage-mechanism
Glencore will hold its 2021 Annual General Meeting on 29 April 2021. Further details will be available
in the notice of meeting, which will be released later this month.
The Appendix to this announcement contains the following additional information which has been
extracted from the Annual Report for the purposes of compliance with DTR 4.1.12 R and 6.3.5 R
only:
a description of principal risks and uncertainties;
a note on related party transactions; and
the Directors' Responsibilities Statement.
The Appendix should be read in conjunction with Glencore's Preliminary Results Announcement
issued on 16 February 2021 (including the notice on forward looking statements at the end of that
announcement). Together these constitute the material required by DTR 4.1.12 R and 6.3.5 R to be
communicated to the media in unedited full text through a Regulatory Information Service. This
announcement should be read in conjunction with and is not a substitute for reading the full Annual
Report.
Page and note references in the text below refer to page numbers and notes in the Annual Report
and terms defined in that document have the same meanings in these extracts.
For further information please contact:
Investors
Martin Fewings t: +41 41 709 28 80 m: +41 79 737 56 42 martin.fewings@glencore.com
Media
Charles Watenphul t: +41 41 709 24 62 m: +41 79 904 33 20 charles.watenphul@glencore.com
Company Secretarial
John Burton t: +41 41 709 26 19 m: +41 79 944 54 34 john.burton@glencore.com
Nicola Leigh t: +41 41 709 27 55 m: +41 79 735 39 16 nicola.leigh@glencore.com
Lionel Mateo t: +41 41 709 28 47 m: +41 79 152 09 05 lionel.mateo@glencore.com
www.glencore.com
Notes for Editors
Glencore is one of the world’s largest global diversified natural resource companies and a major
producer and marketer of more than 60 responsibly-sourced commodities that advance everyday life.
The Group's operations comprise around 150 mining and metallurgical sites and oil production
assets.
With a strong footprint in over 35 countries in both established and emerging regions for natural
resources, Glencore's industrial activities are supported by a global network of more than 30
marketing offices. Glencore's customers are industrial consumers, such as those in the automotive,
steel, power generation, battery manufacturing and oil sectors. We also provide financing, logistics
and other services to producers and consumers of commodities. Glencore's companies employ
around 145,000 people, including contractors.
Glencore is proud to be a member of the Voluntary Principles on Security and Human Rights and the
International Council on Mining and Metals. We are an active participant in the Extractive Indust ries
Transparency Initiative. Our ambition is to be a net zero total emissions company by 2050.
www.facebook.com/Glencore
www.flickr.com/photos/glencore
www.instagram.com/glencoreplc
www.linkedin.com/company/8518
www.slideshare.net/glencore
www.twitter.com/glencore
www.youtube.com/glencorevideos
APPENDIX
Glencore’s Risk Management section
The following has been extracted from pages 70 to 84 of the Annual Report:
Risk management is one of the core responsibilities of the Group’s leadership and it is central to our
decision-making processes. The Group’s leadership fundamental duties as to risk management are:
making a robust assessment of emerging and principal risks
monitoring risk management and internal controls
promoting a risk aware culture
The Board also assesses and approves our overall risk appetite and monitors our risk exposure. This
process is supported by the Audit, HSEC and ECC Committees, whose roles include evaluating and
monitoring the risks inherent in their respective areas as described below and to whom the Group’s
applicable corporate functions (Risk Management, Compliance, Legal, HSEC, Sustainable
Development, HR and IT) report.
Effective risk management is crucial in helping the Group achieve its objectives of preserving its
overall financial strength for the benefit of all stakeholders, and safeguarding its ability to continue as
a going concern, while generating sustainable long-term returns.
The Board, through the ECC and HSEC Committees, reviews and determines the appropriate level of
risk management oversight for the Group’s material JVs. We ensure that our material risk
management programmes are implemented at all JVs that we operate. In other JVs, we seek to
influence our JV partners to adopt our commitment to responsible business practices and implement
appropriate programmes in respect of their main business risks.
RISK MANAGEMENT FRAMEWORK
Our Group functions support senior management and those with respons ibilities for risk within the
business in the development and maintenance of an appropriate institutional risk culture mitigating
risk across the Group, as appropriate.
INDUSTRIAL RISK MANAGEMENT
We believe that every employee should be accountable for the risks related to their role. As a result,
we encourage our employees to escalate risks (not limited to hazards), whether potential or realised,
to their immediate supervisors. This enables risks to be tackled and mitigated at an early stage by
the team with the relevant level of expertise.
Led by the Head of Industrial Assets and the Industrial Leads across each commodity department,
management teams at each industrial operation are responsible for implementing processes that
identify, assess and manage risk.
The risks that may impact on business objectives and plans are maintained in business risk
registers. They include strategic, compliance, operational and reporting risks.
HSEC & SUSTAINABILITY RISK MANAGEMENT
These risk management processes are managed at asset level, with the support and guidance from
the central Sustainability and HSEC and HR teams, and subject to the leadership and oversight of
the HSEC Committee.
The Group’s internal HSEC Audit programme focuses on catastrophic risks, assessing and
monitoring compliance with leading practices.
Further information is provided in the report from the HSEC Committee on page 96 and will be
published in the Group’s sustainability report for 2020.
MARKETING RISK (MR) MANAGEMENT
Glencore’s marketing activities are exposed to a variety of risks, such as commodity price, basis,
volatility, foreign exchange, interest rate, credit and performance, liquidity and regulatory. Glencore
devotes significant resources to developing and implementing policies and procedures to identify,
monitor and manage these risks.
Glencore’s MR is managed at an individual, business and central level. Initial responsibility for risk
management is provided by the businesses in accordance with and complementing their commercial
decision-making. A support, challenge and verification role is provided by the central MR function
headed by the Chief Risk Officer (CRO) via its daily risk reporting and analysis which is split by
market and credit risk.
The MR function monitors and analyses the large transactional flows across many locations using its
timely and comprehensive transaction recording, ongoing reporting of the transactions and resultant
exposures, which provides all encompassing positional reporting, and continually assessing universal
counterparty credit exposure.
The MR team provides a wide array of daily and weekly reporting. For example, daily risk reports
showing Group Value at Risk (VaR) and various other stress tests and analysis are distributed to the
CEO, CFO and CRO. Additionally, business risk summaries showing positional exposure and other
relevant metrics, together with potential margin call requirements, are also circulated daily. The MR
function strives to enhance its stress and scenario testing as well as improve measures to capture
risk exposure within the specific areas of the business, e.g. within metals, concentrate treatment and
refining charges are analysed.
The Group continues to make extensive use of credit enhancement tools, seeking letters of credit,
insurance cover, discounting and other means of reducing credit risk from counterparts. In addition,
mark-to-market exposures in relation to hedging contracts are regularly and substantially
collateralised (primarily with cash) pursuant to margining agreements in place with such hedge
counterparts.
The Group-wide Credit Risk Policy governs higher levels of credit risk exposure, with an established
threshold for referral of credit decisions by business heads t o the CFO and the CEO (relating to
unsecured amounts in excess of $75 million with BBB
(or equivalent) or lower rated counterparts). At lower levels of materiality, decisions may be taken by
the business heads where key strategic transactions or established relationships, together with
credit analysis, suggest that some level of open account exposure may be warranted.
LEGAL AND COMPLIANCE
For legal and compliance risk, see Ethics and Compliance section pages 38 – 43, and laws and
enforcement risk pages 76 – 77.
INTERNAL AUDIT
Glencore’s Internal Audit function reports directly to the Audit Committee. Its role is to evaluate and
improve the effectiveness of business risk management, control, and business governance
processes.
A risk-based audit approach is applied in order to focus on high-risk areas during the audit process. It
involves discussions with management on key risk areas identified in the Group’s budgeting process,
emerging risks, operational changes, new investments and capital projects. Internal Audit reviews
these areas of potential risk, and suggests controls to mitigate exposures identified.
In recognition of the need to conduct assurance on the global Covid-19 related response across our
operations, Corporate HSEC worked with Internal Audit to develop a remote audit program, which
was implemented in May 2020.
The Audit Committee considers and approves the risk -based Internal Audit plan, areas of audit focus
and resources and is regularly updated on audits performed and relevant findings, as well as the
progress on implementing the actions arising. In particular, the Committee considers Internal Audit’s
main conclusions, its KPIs and the effectiveness and timeliness of management’s responses to its
findings. The Audit Committee has concluded that the Internal Audit function remains effective.
VAR
The Group monitors its commodity price risk exposure by using a VaR computation assessing
“open” commodity positions which are subject to price risks. VaR is one of the risk measurement
techniques the Group uses to monitor and limit its primary market exposure related to its physical
marketing exposures and related derivative positions. VaR estimates the potential loss in value of
open positions that could occur as a result of adverse market movements over a defined time
horizon, given a specific level of confidence. The methodology is a statistically defined, probability
based approach that takes into account market volatilities, as well as risk diversification benefits by
recognising offsetting positions and correlations between commodities and markets. In this way,
risks can be compared across all markets and commodities and risk exposures can be aggregated
to derive a single risk value.
Last year, the Board approved the Audit Committee’s recommendation of a one day, 95% VaR limit
of $100 million, consistent with the previous year. This limit is subject to review and approval on an
annual basis. It was temporarily increased to $120 million to reflect the exceptional trading conditions
in oil markets during part of Q2 2020. The purpose of this Group limit is to assist senior management
in controlling the Group’s overall risk profile, within this tolerance threshold. During the year
Glencore’s reported average daily VaR was approximately $39 million, with an observed high of $102
million and a low of $14 million.
There were no breaches in the limit during the year.
The Group remains aware of the extent of coverage of risk exposures and their l imitations. In
addition, VaR does not purport to represent actual gains or losses in fair value on earnings to be
incurred by the Group, nor are these VaR results considered indicative of future market movements
or representative of any actual impact on its future results. VaR remains viewed in the context of its
limitations; notably, the use of historical data as a proxy for estimating future events, market
illiquidity risks and risks associated with longer time horizons as well as tail risks. Recognising
these limitations, the Group complements and refines this risk analysis through the use of stress
and scenario analysis. The Group regularly back-tests its VaR to establish adequacy of accuracy
and to facilitate analysis of significant differences, if any.
The Board has again approved the Audit Committee’s recommendation of a one day, 95% VaR limit
of $100 million for 2021.
PRINCIPAL RISKS AND UNCERTAINTIES
Glencore is exposed to a variety of risks that can have an impact on our business and prospects,
future performance, financial position, liquidity, asset values, growth potential, sustainable
development, reputation and licence to operate. Our principal risks and uncertainties are highly
dynamic and our assessment and our responses to them are critical to our future business and
prospects.
In accordance with UK Financial Reporting Council guidance, we define a principal risk as a risk or
combination of risks that could seriously affect the performance, future prospects or reputation of
Glencore. These include those risks which would threaten the business model, future performance,
solvency or liquidity of the Group.
We define an emerging risk as a risk that has not yet occurred but is at an early stage of becoming
known and/or coming into being and expected to grow greatly in significance in the longer term.
The Board mandates its ECC, HSEC and Audit Committees to identify, assess and monitor the
principal and emerging risks relevant to their respective remits. These Committees usually meet five
times a year and are always followed by a meeting of the Board to review and discuss their work.
The assessment of our principal risks, according to exposure and impact, is detailed on the following
pages.
The commentary on the risks in this section should be read in conjunction with the explanatory text
under Understanding our risks information which is set out below.
EVOLUTION IN PRINCIPAL RISKS
Impact of Covid-19
Globally, Covid-19 has resulted in immense operational disruptions. Challenges for Glencore have
included safeguarding the health and safety of employees, government enforced shut downs, strained
supply chains, liquidity constraints, counterparty financial strains and abrupt shifts to remote
working. Covid-19’s impact on us has been uneven. Key mining regions such as Australia and
Canada have been relatively unimpacted, while Peru, Colombia and South Africa suffered significantly
more disruption.
The continued high incidence of Covid-19 at the date of this report make the outlook over the short-
term uncertain and, notably for various energy based business (coal and oil producing companies),
given the continued acceleration and momentum surrounding decarbonisation, highly more uncertain
over the medium to longer term.
Consistent with the prior year, there are 11 principal risks for the Group, of which, the 6 most
significant and potentially posing a material and adverse effect on the Group are:
1. supply, demand and prices of commodities,
2. geopolitical, permits and licences to operate,
3. laws and enforcement,
4. health, safety, environment, including catastrophic hazards,
5. liquidity, and
6. climate change risks.
Further details on each risk is set out on the following pages.
LONGER–TERM VIABILITY
In accordance with the requirements of the UK Corporate Governance Code, the Board has assessed
the prospects of the Group’s viability over the four-year period from 1 January 2021. This period is
consistent with the Group’s established annual business planning and forecasting processes and
cycle, which is subject to review and approval each year by the Board.
The Board also assessed the medium- and long-term impact of climate change on the outlook for our
commodity businesses, under a range of possible scenarios, as set out on page 18. Such impacts
are uncertain, being particularly dependent on long- term changes in the energy mix related to power
generation and transportation, as well as consumption efficiencies, behavioural change and co -
ordinated implementation of government policy and regulation frameworks, which will materially fall
outside the four-year period selected for assessment of longer term viability. This analysis, however,
indicates stable or improving opportunities across the portfolio in the Current Pathway scenario. In
the Rapid Transformation and Radical Transition scenarios, we project significant coal demand
decline over the longer term, more than compensated however (from a financial perspective) by
materially stronger demand for battery and new energy infrastructure required metals.
The Board has considered the potential risks arising from Brexit and determined there to be no
material impact on longer-term viability.
The four-year plan considers Glencore’s Adjusted EBITDA, capital expenditure, funds from operations
(FFO) and Net debt, and the key financial ratios of Net debt to adjusted EBITDA and FFO to Net debt
over the forecast years and incorporates stress tests to simulate the potential impacts of exposure to
the Group’s principal risks and uncertainties.
For the 2021-24 plan these scenarios included:
a prolonged downturn in the price and demand of commodities most impacting Glencore’s
operations. Prices and FX over Q2 2020 (lowest average quarter in 2020, accounting for
Covid-19) are assumed to prevail for the outlook period to 2024;
foreign exchange movements to which the Group is exposed as a result of its global
operations;
adverse consequences resulting from an increased regulatory environment;
actions at the Group’s disposal to mitigate the adverse impacts of the above, principally the
ability to defer or cancel capital expenditure, to manage the working capital cycle and to
reduce or stop distributions to shareholders; and
consideration of the potential impact of adverse movements in macroeconomic assumptions
and their effect on the above key financial KPIs and ratios which could increase the Group’s
access to or cost of funding.
The scenarios were assessed taking into account current risk appetite and any mitigating actions
Glencore could take, as required, in response to the potential realisation of any of the stressed
scenarios.
Based on the results of the related analysis, the Directors have a reasonable expectation that the
Group will be able to continue in operation and meet its liabilities as they fall due over the four-year
period of this assessment. They also believe that the review period of four years is appropriate having
regard to the Group’s business model, strategy, principal risks and uncertainties, and viability.
Understanding our risks information
There are many risks and uncertainties which have the potential to significantly impact our business.
The order in which these risks and uncertainties appear does not necessarily reflect the likelihood of
their occurrence or the relative magnitude of their potential material adverse effect on our business.
We have sought to provide examples of specific risks. However, in every case these do not attempt
to be an exhaustive list.
These principal risks and uncertainties should be considered in connection with any forward looking
statements in this document as explained on page 244.
Identifying, quantifying and managing risk is complex and challenging. Although it is our policy to
identify and, where appropriate and practical, actively manage risk, our policies and procedures may
not adequately identify, monitor and quantify all risks.
This section describes our attempts to manage, balance or offset risk. Risk is, however, by its very
nature uncertain and inevitably events may lead to our policies and procedures not having a material
mitigating effect on the negative impacts of the occurrence of a particular event. Our scenario
planning and stress testing may accordingly prove to be optimistic, particularly in situations where
material negative events occur in close proximity. Since many risks are connected, our analysis
should be read against all risks to which it may be relevant.
In this section, we have sought to update our explanations, reflecting our current outlook. Mostly this
entails emphasising certain risks more strongly than other risks rather than the elimination of, or
creation of, risks. Certain investors may also be familiar with the risk factors that are published in the
Group debt or equity prospectuses or listing documents. These provide in part some differing
descriptions of our principal risks.
A recent example is available on our website at: glencore.com/ who-we-are/governance
In addition, more information on our risks is available in the relevant sections of our website.
To provide for concise text:
where we hold minority interests in certain businesses, although these entities are not
generally subsidiaries and would not usually be subject to the Group’s operational control,
these interests should be assumed to be subject to these risks. “Business” refers to these
and any business of the Group
where we refer to natural hazards, events of nature or similar phraseology we are referring to
matters such as earthquake, flood, severe weather and other natural phenomena
where we refer to “mitigation” we do not intend to suggest that we eliminate the risk, but
rather it refers to the Group’s attempt to reduce or manage the risk. Our mitigation of risks
will usually include the taking out of insurance where it is customary and economic to do so
this section should be read as a whole – often commentary in one section is relevant to other
risks
“commodity/ies” will usually refer to those commodities which the Group produces or sells
“law” includes regulation of any type
“risk” includes uncertainty and hazard and together with “material adverse effect on the
business” should be understood as a negative change which can seriously affect the
performance, future prospects or reputation of the Group. These include those risks which
would threaten the business model, future performance, reputation, solvency or liquidity of the
Group
a reference to a note is a note to the 2020 financial statements
a reference to the sustainability report is our 2020 sustainability report to be published in Q2
of 2021
EXTERNAL RISKS
1. Supply, demand and prices of commodities
Risk movement in 2020 - Increase
Risk appetite - medium. Being a resources company, we are subject to the inherent risk to the
business of sustained low prices of our main commodities. We seek to ensure this risk is
ameliorated through scale of sufficiently low cost operations and diversity of product. For marketing
activities, our market risk appetite is relatively low and our positions are usually hedged, when
possible.
Description and potential impact - The revenue and earnings of substantial parts of our industrial
asset activities and, to a lesser extent, our marketing activities, are dependent upon prevailing
commodity prices. Commodity prices are influenced by a number of external factors, including the
supply of and demand for commodities, speculative activities by market participants, global political
and economic conditions, related industry cycles and production costs in major producing countries.
The dependence of the Group (especially our industrial business) on commodity prices, suppl y and
demand of commodities, make this the Group’s foremost risk.
We are dependent on the expected volumes of supply or demand for commodities which can vary for
many reasons, such as competitor supply policies, changes in resource availability, government
policies and regulation, costs of production, global and regional economic conditions and demand in
end markets for products in which the commodities are used. Supply and demand volumes can also
be impacted by technological developments, fluctuations in global production capacity, global and
regional weather conditions, natural disasters and diseases, all of which impact global markets and
demand for commodities.
Future demand for certain commodities might decline (e.g. fossil fuels), whereas others might
increase (such as copper, cobalt, and nickel for their use in electric vehicles and batteries more
broadly), taking into consideration the transition to a low carbon economy.
Furthermore, changes in expected supply and demand conditions impact the expected future prices
(and thus the price curve) of each commodity and significant falls in the prices of certain
commodities (e.g. copper, coal, zinc and cobalt) can have a severe drag on our financial
performance, impede shareholder returns and could lead to concerns by external stakeholders as to
the strength of the Group’s balance sheet.
This risk is more prevalent in certain commodities, such as steel, coal and oil.
In particular, it is a widely held view that demand for coal will reduce due to political pres sures, cost
reductions for alternatives (renewables and LNG) and possible carbon taxes. Oil
production/processing is significantly less material for the Group.
New or improved energy production possibilities and/or technologies can reduce the demand for
some commodities such as coal.
Any adverse economic developments, particularly impacting China and fast growing developing
countries, could lead to reductions in demand for, and consequently price reductions of,
commodities.
Developments - The demand shock to the global economy from Covid-19 initially led to significantly
lower commodity prices, particularly in energy products. Notwithstanding a healthy level of recovery
in many commodities in the second half of last year, markets continue to be uncertain a nd
potentially volatile.
Due primarily to statistical modelling outcomes in oil marketing, the Group temporarily increased its
Value at Risk tolerance limit by $20 million in Q2, cancelling this shortly afterwards.
Industrial operations sought to reduce capital expenditure. For certain operations that were cash
negative, difficult decisions were made to suspend some operations.
Major decisions by governments can also lead to lower demand for our commodities in their
countries or regions, for example China’s restrictions on certain Australian sourced commodities
which began in 2020.
See the Chief Executive Officer’s review on page 2, our market and emerging drivers on page 6 and
the financial review on page 44.
Mitigating factors - We continue to maintain focus on cost discipline and achieving greater
operational efficiency.
We actively manage marketing risk, including daily analysis of Group value at risk (VaR).
We maintain both a diverse portfolio of commodities, geographies, assets and liabilities and a global
portfolio of customers and contracts.
We prepare for anticipated shifts in commodity demand, for example by putting a special focus on
the parts of the business that will potentially grow with increases in usage of electric vehicles and
battery production, and by closely monitoring fossil fuel (particularly thermal coal) demands. We can
also reduce the production of any commodity within our portfolio in response to changing market
condition.
2. Currency exchange rates
Risk movement in 2020 - Stable
Risk appetite - Low. Where possible, foreign exchange (FX) exposure to non-operating FX risks is
hedged. FX risk inherent in the operating costs of industrial activities is typically naturally hedged
through movements in commodity prices.
Description and potential impact - FX changes happen all the time but are often difficult to predict.
Producer country currencies tend to increase in correlation with relevant higher commodity prices.
Similarly, decreases in commodity prices are generally associated with increases in the US dollar
relative to local producer currencies.
The vast majority of our sales transactions are denominated in US dollars, while operating costs are
spread across many different countries, the currencies of which fluctuate against the US dollar. A
depreciation in the value of the US dollar against one or more of these currencies will result in an
increase in the cost base of the relevant operations in US dollar terms.
The main currency exchange rate exposure is through our industrial assets, as a large proportion of
the costs incurred by these operations is denominated in the currency of the country in which each
asset is located.
The largest of these exposures are to the currencies listed on page 55.
Developments - A level of producer country FX depreciation occurred during 2020, providing some
local currency cost relief relative to the US dollar.
Near term confidence in stability of global demand (and thus indirectly FX rates for relevant producer
countries) hinges on many factors, particularly those that relate to the prospects of global economic
growth, including the U.S./China trade developments, political/economic stability in the Middle East
and the ongoing disruption caused by the coronavirus pandemic.
Mitigating factors - The inverse FX correlation (against USD commodity prices) usually provides a
partial natural FX hedge for the industrial business. In respect of commodity purchase and sale
transactions denominated in currencies other than US dollars, the Group’s policy is usually to hedge
the specific future commitment through a forward exchange contract.
From time to time, the Group may hedge a portion of its currency exposures and requirements in an
attempt to limit any adverse effect of exchange rate fluctuations.
We monitor internally financial impacts resulting from foreign currency movements.
3. Geopolitical, permits and licences to operate
Risk movement in 2020 - Stable
Risk appetite - High. We operate in various countries with less developed political and regulatory
regimes. To be considered a truly diversified commodities group, operations in these jurisdictions are
required.
Description and potential impact - We operate and own assets in a large number of geographic
regions and countries, some of which are categorised as developing, complex or having unstable
political or social fabrics. As a result, we are exposed to a wide range of political, economic,
regulatory, social and tax environments. The Group transacts business in locations where it is
exposed to a risk of overt or effective expropriation or nationalisation. Our operations may also be
affected by political and economic instability, including terrorism, civil disorder, violent crime, war and
social unrest.
Increased scrutiny by governments and tax authorities in pursuit of perceived aggressive tax
structuring by multinational companies has elevated potential tax exposures for the Group.
Additionally, governments have sought additional sources of revenue by increasing rates of taxation,
royalties or resource rent taxes or may increase sustainability obligations sometimes in breach of
existing stability undertakings.
The terms attaching to any permit or licence to operate may be onerous and obtaining these and
other approvals, which may be revoked, can be particularly difficult. Furthermore, in certain countries,
title to land and rights and permits in respect of resources are not always clear or may be
challenged.
Adverse actions by governments and others can result in operational/project delays or loss of permits
or licences to operate. Policies or laws in the countries in which we do business may change in a
manner that may negatively affect the Group.
The suspension or loss of our permits or licences to operate could have a material adverse effect on
the Group and could also preclude Glencore from participating in bids and tenders for future business
and projects, therefore affecting the Group’s long-term viability.
Our licences to operate through mining or drilling rights are dependent on a number of factors,
including compliance with regulations. It also depends on constructive relationships with a wide and
diverse range of stakeholders.
The continued operation of our existing assets and future plans are in part dependent upon broad
support, our “social licence to operate”, and a healthy relationship with the respective local
communities – see further Community Relations and Operating risks concerning workforce disputes.
Developments - Covid-19 has given rise to new or increased concerns with various stak eholders,
including our workers, host communities and governments, in relation to public health and the broad
economic impacts of reduced demand and potentially lower production levels.
Resource nationalism continues to be a challenging issue in many count ries.
We published our latest annual Payments to Governments report for 2019 which provided details on
the total government contributions of over $7.7 billion. It also set out details of payments on a project
by project basis. We expect to publish our report on 2020 in the middle of this year.
A new law on procurement in the DRC is now being enforced providing among other matters for
obligatory contracting with DRC majority-owned firms and payment of a 1.2% levy on the value of
contracts.
Also see Community and Human Rights risk on pages 83 – 84.
Mitigating factors - The Group’s industrial assets are diversified across various countries. The Group
also continues to actively engage with governmental authorities, particularly against any backdrop of
material upcoming changes and developments in legislation and enforcement policies.
We endeavour to design and execute our projects according to high legal, ethical, social, and human
rights standards, and to ensure that our presence in host countries leaves a posi tive lasting legacy
(see sustainability risks later in this section).
This commitment is important in assisting in the management of these risks and to maintain our
permits and licences to operate.
The Group has an active engagement strategy with the governments, regulators and other
stakeholders within the countries in which it operates or intends to operate. Through strong
relationships with stakeholders we endeavour to secure and maintain our licences to operate.
The Group has increased its engagement due to Covid-19 with employees, relevant governmental
authorities, regulators and other stakeholders.
4. Laws and enforcement
Risk movement in 2020 - Increase
Risk appetite - Medium. The Group maintains programmes which seek to ensure that we comply
with the laws and external requirements applicable to our business and products, and has invested
significant resources in enhancing these compliance programmes in recent years. This investment
reflects the fact that the Group has a low risk appetite when considering entering into transactions or
business activities that present compliance risk.
Nevertheless, some of our existing industrial and marketing activities are located in countries that are
categorised as developing or as having complex political or social c limates, and/or where corruption
is generally understood to exist, and therefore there will always be residual risk in relation to our
compliance with laws and external requirements.
Description and potential impact - We are exposed to extensive laws, including those relating to
bribery and corruption, sanctions, taxation, anti-trust, market conduct rules and regulation,
environmental protection, use of hazardous substances, product safety and dangerous goods
regulations, development of natural resources, licences over resources, exploration, production and
post-closure reclamation, employment of labour and occupational health and safety standards. The
legal system and dispute resolution mechanisms in some countries in which we operate may be
uncertain, meaning that we may be unable to enforce our understanding of our rights and obligations
under these laws.
The costs associated with compliance with these laws and regulations, including the costs of
regulatory permits, are substantial and increasing. Any changes to these laws or their more stringent
enforcement or restrictive interpretation could cause additional significant expenditure to be incurred
and/or cause suspensions of operations and delays in the development of industrial assets. Failure
to obtain or renew a necessary permit or the occurrence of other disputes could mean that we would
be unable to proceed with the development or continued operation of an asset and/or impede our
ability to develop new industrial properties.
As a diversified sourcing, marketing and distribution company conducting complex transactions
globally, we are particularly exposed to the risks of fraud, corruption, market abuse, sanctions
breaches and other unlawful activities both internally and externally. Our marketing operations are
large in scale, which may make fraudulent, corrupt or other unlawful transactions difficult to detect.
In addition, some of our industrial activities are located in countries where corruption is more
commonly seen; and some of our counterparties have in the past, and may in the future, become the
targets of economic sanctions. Corruption and sanctions risks remain highly relevant for businesses
operating in international markets, as shown by recent enforcement actions both inside and outside
the resources sector.
Governmental and other authorities have commenced, and may in the future commence,
investigations against the Group (including those listed on page 212) in relation to alleged non -
compliance with these laws, and/or may bring proceedings against the Group in relation to alleged
non-compliance. The cost of cooperating with the existing investigations and/or defending
proceedings is substantial.
Investigations or proceedings could lead to reputational damage, the imposition of material fines ,
penalties, redress or other restitution requirements, or other civil or criminal sanctions on the Group
(and/or on individual employees of the Group), the curtailment or cessation of operations, orders to
pay compensation, orders to remedy the effects of violations and/or orders to take preventative steps
against possible future violations. The impact of any monetary fines, penalties, redress or other
restitution requirements, and the reputational damage that could be associated with them as a result
of proceedings that are decided adversely to the Group, could be material.
In addition, the Group may be the subject of legal claims brought by private parties in connection with
alleged non-compliance with these laws, including class action suits in connection with governmental
and other investigations and proceedings, and lawsuits based upon damage resulting from
operations. Any successful claims brought against the Group could result in material damages being
awarded against the Group, the cessation of operations, compensation and remedial and/or
preventative orders.
Developments – On 19 June 2020, the Company was notified by the Office of the Attorney General of
Switzerland (OAG) that it had opened a criminal investigation into Glencore International AG for
failure to have the organisational measures in place to prevent alleged corruption in the DRC.
The current main investigations are summarised in note 31. The Group is continuing to cooperate
fully with each of the relevant authorities concerning these investigations. The Investigations
Committee of the Board manages the Group’s responses to these investigations.
It is also possible that the various investigations may expand and/or other authorities may open
investigations into the Group.
The final scope and outcome of the investigations listed above is not possible to predict or estimate.
Mitigating factors - We seek to ensure compliance through our commitment to complying with or
exceeding the laws and regulations applicable to our operations and products and through monitoring
of legislative requirements, engagement with government and regulators, and compliance with the
terms of permits and licences.
We seek to mitigate the risk of breaching applicable laws and external requirements through our risk
management framework.
We have implemented a Group Ethics and Compliance programme that includes a range of policies,
standards, procedures, guidelines, training and awareness, monitoring and investigations.
We have increased in recent years our focus on, and resources dedicated to, the Group Ethics and
Compliance programme, including through increasing the number of dedicated compliance
professionals, enhancing our compliance policies and procedures and controls and strengthening the
Group’s Raising Concerns programme and investigations function – see pages 42.
However, there can be no assurance that such policies, standards, procedures and controls will
adequately protect the Group against fraud, corruption, market abuse, sanctions breaches or other
unlawful activities.
5. Liquidity
Risk movement in 2020 – Stable
Risk appetite - Low. It is the Group’s policy to operate a strong BBB rated balance sheet and to
ensure that a minimum level of cash and/or committed funding is available at any given time.
Description and potential impact - Liquidity risk is the risk that we are unable to meet our payment
obligations when due, or are unable, on an ongoing basis, to borrow funds in the market at an
acceptable price to fund our commitments. While we adjust our minimum internal liquidity threshold
from time to time in response to changes in market conditions, this minimum internal liquidity target
may be breached due to circumstances we are unable to control, such as general market
disruptions, sharp movements in commodity prices or an operational problem that affects our banks,
suppliers, customers or ourselves.
Our failure to access funds (liquidity) would severely limit our ability to engage in desired activities.
A lack of liquidity may mean that we will not have sufficient funds available for our marketing and
industrial activities, both of which employ substantial amounts of capital. If we do not have funds
available for these activities then they will decrease.
Debt costs may rise owing to ratings agency downgrades and the possibility of more restricted
access to funding.
Developments - Note 27 details the fair value of our financial assets and liabilities. Note 26 details our
financial and capital risk management including liquidity risk.
The Group’s Net debt has reduced from $19.7 billion at 30 June 2020 to $15.8 billion at year end. The
elevated debt position earlier in 2020, coupled with the prevailing market uncertainty and the adoption
of a cautious approach from a broader stakeholder and rating agencies perspective, led to the
Board’s decision not to proceed with a 2020 cash distribution.
Our net funding at 30 December 2020 was $35.4 billion (31 December 2019: $34.4 billion).
The Group’s business model relies on ready access to substantial borrowings at reasonable cost,
which has continued to be forthcoming, noting the Group’s successful issuance of circa $3.5 billion
long-term bonds in Q3 2020 at attractive interest rates.
Covid-19 initially resulted in lower commodity prices for many of our key commodit ies, though this
reversed during H2 as noted in the section on our Marketing business. During the very volatile end of
Q1 period, Glencore refinanced and extended its core revolving credit facilities, thereby maintaining
and lengthening our committed available liquidity levels at around $10 billion.
Mitigating factors - Diversification of our funding sources (bank borrowings, bonds and trade finance,
further diversified by currency, interest rate and maturity).
In light of the Group’s extensive funding activities, maintaining investment grade credit rating status is
a financial priority. The Group’s credit ratings are currently Baa1 (negative outlook) from Moody’s and
BBB+ (stable outlook) from Standard & Poor’s. Glencore’s publicly stated objective, as part of its
overall financial policy package, is to seek and maintain strong Baa/BBB credit ratings from Moody’s
and Standard & Poor’s respectively. In support of this, Glencore targets a maximum 2x Net
debt/Adjusted EBITDA ratio through the cycle, augmented by an upper Net debt cap of ~$16 billion,
excluding marketing lease liabilities (c.$650 million as at 31 December 2020). This financial policy
facilitates access to funds, even in periods of market volatility. It is a priority to reduce the Net debt
balance over the medium term to the lower end of the $10-16bn range (below $13bn by the end of
2021), which is being aided by the current healthy free cash flow generation.
It should be noted that the credit ratings agencies make certain adjustments, including a discount to
the value of our Readily Marketable Inventory, such that their calculated net debt is considerably
higher.
BUSINESS RISKS
6. Counterparty credit and performance
Risk movement in 2020 – Increase
Risk appetite - Medium. Where possible, credit exposures are to be covered through credit mitigation
products.
Description and potential impact - Financial assets consisting principally of receivables and
advances, derivative instruments and long-term advances and loans can expose us to concentrations
of credit risk.
Furthermore, we are subject to non- performance risk by our suppliers, customers and hedging
counterparties, in particular via our marketing activities.
Non-performance by suppliers, customers and hedging counterparties may occur and cause losses
in a range of situations, such as:
a significant increase in commodity prices resulting in suppliers being unwilling to honour
their contractual commitments to sell commodities at pre-agreed prices
a significant reduction in commodity prices resulting in customers being unwilling or unable to
honour their contractual commitments to purchase commodities at pre-agreed prices
suppliers subject to prepayment may find themselves unable to honour their contractual
obligations due to financial distress or other reasons
Open account risk is taken but this is generally guided by the Group-wide Credit Risk Policy for
higher levels of credit risk exposure, with an established threshold for referral of credit decisions by
department heads to CFO/CEO, relating to unsecured amounts in excess of $75 million with BBB or
lower rated counterparts, which occurs from time to time, in respect of various key strategic
relationships.
Developments - Many of our customers and suppliers are experiencing uncertainty and in some
cases, financial hardship. We have regular contact with our key counterparties and, in the vast
majority of cases, deliveries and payments have continued in the normal course of business.
Additionally, due to Covid-19 related uncertainties, certain accounts receivable insurance limits have
been significantly reduced.
Exposures relating to material oil pre- payments are a particular area of focus.
Our trade receivables were approximately $2 billion lower year on year, in a generally higher
commodity price environment, reflecting steady collections.
The Group’s accounts receivable balance, including assessment of doubtful accounts, is set out in
note 13.
Mitigating factors - We seek to diversify our counterparties. We place limits on open accounts, and
we monitor these.
The Group continues to make extensive use of credit enhancement tools, seeking letters of credit,
insurance cover, discounting and other means of reducing credit risk with counterparts.
We monitor the credit quality of our physical and hedge counterparties and seek to reduce the risk of
customer default or non-performance by requiring credit support from creditworthy financial
institutions.
Our teams monitor and report regularly to the management on financial and operating results.
7. Operating
Risk movement in 2020 – Increase
Risk appetite - Low. It is the Company’s strategic objective to focus on its people and to conduct
safe, reliable and efficient operations.
Description and potential impact - Our industrial activities are subject to numerous risks and hazards
normally associated with the initiation, development, operation and/or expansion of natural resource
projects, many of which risks and hazards are beyond our control. These include unantic ipated
variations in grade and other geological problems (so that anticipated or stated reserves, may not
conform to expectations). Other examples include natural hazards, processing problems, technical
malfunctions, unavailability of materials and equipment, unreliability and/or constraints of
infrastructure, industrial accidents, labour force challenges, disasters, protests, force majeure
factors, cost overruns, delays in permitting or other regulatory matters, vandalism and crime.
The maintenance of positive employee and union relations and engagement, and the ability to attract
and retain skilled workers, including senior management, are key to our success. This attraction and
retention of highly qualified and skilled personnel can be challenging, especi ally, but not only, in
locations experiencing political or civil unrest, or in which employees may be exposed to other
hazardous conditions.
Many employees, especially at the Group’s industrial activities, are represented by labour unions
under various collective labour agreements. Their employing company may not be able to
satisfactorily renegotiate its collective labour agreements when they expire and may face tougher
negotiations or higher wage demands than would be the case for non-unionised labour. In addition,
existing labour agreements may not prevent a strike or work stoppage.
The development and operating of assets may lead to future upward revisions in estimated costs,
delays or other operational difficulties or damage to properties or facilities. This may cause
production to be reduced or to cease and may further result in personal injury or death, third party
damage or loss or require greater infrastructure spending. Also, the realisation of these risks could
require significant additional capital and operating expenditures.
Some of the Group’s interests in industrial assets do not constitute controlling stakes. Although the
Group has various agreements in place which seek to protect its position where it does not exercise
control, the management of such operations and other shareholders may have interests or goals that
are inconsistent with ours. They may take action contrary to the Group’s interests or be unable or
unwilling to fulfil their obligations.
Severe operating or market difficulties may result in impairments, details of which are recorded in
note 6.
Developments - Business continuity planning has been challenging in many countries. The response
to the pandemic has varied by jurisdiction, with authorities imposing different requirements, often
changing as the crisis evolved. Almost all operations were impacted by changed protocols / working
practises, while many were required to fully suspend production for a period of time.
The Group engaged with relevant government authorities and advisors to seek to ensure that its
responses and measures focused on the health of its workforce and communities, while allowing its
operations to continue, where reasonably practicable. Management ensured that Business Continuity
Plans (BCP) were in place across its business.
Cost control and reduction remains a significant area of management focus, noting that in the
context of mineral resources, absolute costs will tend to increase over time as incremental resources
are likely further from the processing plant and/or deeper, and dilution factors may be higher. A
number of operations have adopted structured programmes to analyse their costs, identify marginal
savings and implement these.
Maintenance and, where possible, reduction of unit costs is regularly reviewed by management.
Infrastructure availability remains a key risk, though this has been mitigated by certain long-term
measures taken.
Katanga’s metallurgical plant received sufficient continuous high-voltage power to deliver on its ramp-
up on schedule, although we are not complacent and continue to monitor the situation. In South
Africa, the operations at our Ferroalloys smelters were impacted by power disruptions and an
explosion occurred at Astron Energy refinery resulting in the loss of two lives and a lengthy
shutdown.
Despite the challenges created by the global pandemic, we have maintained engagement campaigns
with employees to receive direct feedback on the Group’s culture and practices.
Mitigating factors - Development and operating risks and hazards are managed through our ongoing
project status evaluation and reporting processes and ongoing assessment, reporting and
communication of the risks that affect our operations along with updates to the risk register.
We publish our production results quarterly and our assessment of reserves and resources based on
available drilling and other data sources annually.
Conversion of resources to reserves and, eventually, reserves to production is an ongoing process
that takes into account technical and operational factors, economics of the particular commodities
concerned and the impact on the communities in which we operate.
Local cost control measures are complemented by global procurement that leverages our scale to
seek to achieve favourable terms on high-consumption materials such as fuel, explosives and tyres.
One of the key factors in our success is a good and trustworthy relationship with our people and
developing a direct engagement with them. This priority is reflected in the principles of our
programme and related guidance, which require regular, open, fair and respectful communication,
zero tolerance for human rights violations, fair remuneration and, above all, a safe working
environment as outlined on our website at: glencore.com/ careers/our-culture and in the Our people
section on page 27.
8. Cyber
Risk movement in 2020 – Increase
Risk appetite - Low. Where possible, cyber exposure risks are mitigated through layered cyber
security, proactive monitoring and routine penetration testing to confirm security of systems.
Description and potential impact - Cyber risks for firms have increased significantly in recent years
owing in part to the proliferation of new digital technologies, increasing degree of connectivity and a
material increase in monetisation of cybercrime.
A cybersecurity breach, incident or failure of Glencore’s IT systems could disrupt our businesses,
put employees at risk, result in the disclosure of confidential information, damage our reputation and
create significant financial and legal exposure for the Group.
Our activities depend on technology for industrial production, efficient operations, environmental
management, health and safety, communications, transaction processing and risk management. We
recognise that the increasing convergence of IT and Operational Technology (OT) networks will create
new risks and demand additional management time and focus. We also depend on third parties in
long supply chains that are exposed to the same cyber risks but which are largely outside our
control.
The security of long interconnected commodity supply chains is an area of increasing concern that
we monitor closely. Although Glencore invests heavily to monitor, maintain and regularly upgrade its
systems, processes and networks, absolute security is not possible.
Developments - Our IT security monitoring platforms frequently detect attempts to breach our
networks and systems. During 2020, none of these events resulted in a material breach of our IT
environment nor resulted in a material business impact.
In March 2020, we initiated our BCP to facilitate a significant degree of remote working at our
operations globally in response to the Covid-19 pandemic. With more of our people working from
home, we are more reliant, not only on our own corporate network, but also Internet service providers
to the home. Our IT security monitoring platforms also detected a material increase in phishing fraud
attempts linked to Covid-19.
The emergence of machine learning and artificial intelligence will increase the volume and
sophistication of fraud attempts. The rise of “Deepfake” technology using machine learning makes it
easier to manipulate audio content that could be used in phishing or fraud attacks by impersonating
senior executives. We continue to monitor developments in this space.
We also expect an increase in “supply chain attacks” through which legitimate third party software is
manipulated in an attempt to spread malware or gain access to systems.
Mitigating factors - We publish IT security standards and proactively educate our employees in order
to raise awareness of cyber security threats.
Where possible, cyber exposure risks are mitigated through layered cyber security, proactive
monitoring and cyber security penetration testing to confirm the security of systems.
We seek to keep our system software patches up to date and have global platforms to manage patch
compliance. We have adopted strict privileged access management to ensure administrator rights on
critical systems are protected. We have multiple layers of email security and harden our computers
and servers to protect against malware. Corporate applications and communications are secured with
multiple layers of security including two-factor authentication and VPN technology for remote access.
We use global IT security platforms in order to proactively monitor and manage our cyber risks. We
routinely conduct third party penetration tests to independently assess the security of our IT
systems. We have a dedicated programme to enhance the monitoring and security of our OT
platforms.
Our IT Security Council sets the global cybersecurity strategy, conducts regular risk assessments
and designs cyber security solutions that seek to defend against emerging mal ware, viruses,
vulnerabilities and other cyber threats. Our Cyber Defence Centre is responsible for day -to-day
monitoring of cyber vulnerabilities across the Group and driving remediation of threats. We have an
incident response team that is responsible for coordinating the response in the event of a major cyber
incident.
SUSTAINABILITY RISKS
9. Health, safety, environment
Risk movement in 2020 – Stable
Risk appetite - Medium. We impose HSEC policies and standards designed to protect our people
and ensure we comply with laws and external regulations.
Description and potential impact - We are committed to ensuring the safety and wellbeing of our
people and the communities and environment around us. Catastrophic events that take place in the
natural resource sector can have disastrous impacts on workers, communities, the environment and
corporate reputation, as well as a substantial financial cost.
The success of our business is dependent on a safe and healthy workforce. Managing risks to the
safety and health of our people is essential for their long-term wellbeing. It also helps us to maintain
our productivity and reduce the likelihood of workplace compensation claims.
A number of our assets are in regions with little or no access to health facilities and, due to cultural
and/or historical reasons, have poor working conditions, organisational cultures and approaches
towards personal safety. Our presence in these regions can address these challenges through
implementing strong occupational health and safety management systems. Our operations can have
direct and indirect impacts on the environment. Our ability to manage and mitigate these may impact
our operating licences as well as affect future projects and acquisitions.
Our operations are often located close to communities with limited healthcare.
Local health services might be in the early stages of development, or local authorities may not have
the resources to cope with the scale of need.
We work with national and regional authorities to identify how Glencore’s presence can support
domestic healthcare programmes.
Environmental, safety and health regulations may result in increased costs or, in the event of non-
compliance or incidents causing injury or death or other damage at or to our facilities or surrounding
areas, may result in significant losses. These include, those arising from (1) interruptions in
production, litigation and imposition of penalties and sanctions and (2) having licences and permits
withdrawn or suspended while being forced to undertake extensive remedial clean-up action or to pay
for government-ordered remedial clean-up actions.
Liability may also arise from the actions of any previous or subsequent owners or operators of the
property, by any past or present owners of adjacent properties, or by third parties.
We operate in some countries characterised with complex and challenging political and/or social
climates. This results in a residual risk for compliance with our HSEC policies and standards, as well
as with external laws and regulations.
Developments - In response to Covid-19, Glencore focused on efforts to ensure the resilience of the
business, including daily monitoring of global conditions, anticipation of potential impacts, and
development of action plans and controls to mitigate risks. At the start of the crisis, the corporate
Covid-19 Global Response Steering Committee and Incident Management Team were established to
maintain continuous communication and response support for our global industrial and marketing
teams, resolving potential threats to business continuity, and focusing on the health and well -being of
our workforce.
During 2020, we have also remained focused on other significant risks facing our industry, arising
from operational catastrophes such as the mining dam collapses in Brazil in the last five years.
During 2020, the HSEC Committee continued to sponsor and monitor the Group’s sustainability risks
assurance process. Its focus continues to be on the Group’s HSEC catastrophic hazards. As well,
we continued implementation of our Group-wide Tailings Storage Facility and Dam Management
Standard, throughout the business and participated in the development of the new Global Industry
Standard on Tailings Management (GISTM), in association with International Council on Mining &
Metals (ICMM) member companies.
We continue to take a flexible local approach to transforming our workforces’ safety and health
attitudes and culture. We review and strengthen our policies as technology and methodologies
change and regularly assess their implementation. We continue to strive to achieve our ambitions of
zero workplace fatalities or catastrophic environmental incidents.
We regret that we have recorded 8 fatalities at our operations (2019: 17). Our Board and senior
management are committed to ongoing efforts to improve practices in order to provide a safe working
environment. To underscore these efforts and commitment, we initiated a comprehensive review of
our safety performance expectations and aim to relaunch our SafeWork programme in early 2021 –
see page 35. No major or catastrophic environmental (category 4-5 and above) incidents have
occurred during the year.
Mitigating factors - Our approach to the management of health, safety and environment, and our
expectations of our workers and our business partners are outlined in our policies and standards.
These underpin our approach towards social, environmental, safety and compliance indicators,
providing clear guidance on the standards we expect all our operations to achieve.
In 2020 a new corporate Health, Safety, Environment, and Community and Human Rights team was
established under the Head of Industrial Assets and Head of HSEC-HR. The objective of this team is
to enhance group-level HSEC-HR governance and technical standards to ensure an efficient and
consistent approach to managing HSEC-HR related issues across the business. We conducted a
review of our SafeWork program, which is Glencore’s approach to eliminating fatalities. The
programme focuses on identifying and managing the hazards in every workplace and is built on a set
of minimum expectations and mandatory protocols, standards, behaviours and safety tools. Well -led,
consistent application of SafeWork will drive operating discipline and prevent fatal accidents at our
assets. This will be launched in Q1 2021.
Our commitment to complying with or exceeding the health, safety and environmental laws,
regulations and best practice guidelines applicable to our operations and products is driven through
our sustainability framework.
We remain focused on the significant risks facing our industry arising from operational catastrophic
events. For example, the considerable verification work and enhanced monitoring of tailings storage
facilities is assisting in greater visibility and control of these risks, and we continue to undertake work
to improve the safety and stability of these facilities.
We monitor catastrophic risks across our portfolio and operate emergency response programmes.
We are working towards creating a workplace without fatalities, injuries or occupational diseases
through establishing a positive safety culture.
We work with local authorities, local community representatives and other partners, such as NGOs,
to help to overcome major public health issues in the regions where we work, such as Covid-19,
HIV/AIDS, malaria and tuberculosis.
See also the Sustainability review on page 35 and the HSEC Committee report on page 96. Further
details will also be published in our 2020 Sustainability Report.
There can be no assurances that our policies and procedures will protect the Group against health,
safety and environmental risks.
10. Climate change
Risk movement in 2020 – Increase
Risk appetite - High. Climate change is a material issue that can affect our business through
regulations to reduce emissions, carbon pricing mechanisms, extreme climatic events, access to
capital, permitting risks and energy costs, as well as changing demand for the commodities we
produce and market. We consider our risk appetite as high due to our significant exposure to coal
producing assets.
Description and potential impact - A number of governments have already introduced, or are
contemplating the introduction of regulatory responses to support the achievement of the goals of the
Paris Agreement and the transition to a low-carbon economy. This includes countries where we have
assets such as Australia, Canada, Chile and South Africa, as well as our customer markets such as
China, South Korea, Japan and Europe.
A transition to a low-carbon economy and its associated public policy and regulatory developments
may lead to:
the imposition of new regulations, and climate change related policies
adverse to our interests in fossil fuels by actual or potential investors, customers and banks,
potentially impacting Glencore’s reputation, access to capital and financial performance
increased costs for energy and for other resources, which may impact the productivity of our
assets and associated costs
the imposition of levies related to greenhouse gas emissions
increased costs for monitoring and reporting related to our carbon footprint
impacts on the development or maintenance of our assets due to restrictions in operating
permits, licences or similar authorisations
Variations in commodity use from emerging technologies, moves towards renewable energy
generation and policy changes may affect demand for our products, both positively and negatively.
Climate change may increase physical risks to our assets and related infrastructure, largely driven
from extreme weather events and water related risks such as flooding or water scarcity.
There has been a significant increase in litigation (including class actions), in which climate change
and its impacts are a contributing or key consideration, including administrative law cases, tortious
cases and claims brought by investors. In particular, a number of lawsuits have been brought against
companies with fossil fuel operations in various jurisdictions seeking damages related to climate
change.
Developments - Due to falling demand for coal in Europe, and fall in oil price respectively, during
2020, the Group wrote down the value of its Colombian coal and Chad oil assets by c.$2.2 billion.
During the year, the Covid-19 global pandemic led to a projected 8% decrease in global energy
demand for 2020-2021, which affected all energy providers and resulted in a lower demand for coal,
including in Asia, as well as for seaborne coal. As global economies recover from the pandemic’s
impacts, demand for coal is expected to improve. However, the likely focus of government stimulus
packages on low carbon technologies and ongoing reductions in the cost of renewables has the
potential to accelerate the reduction in demand for fossil fuels over the medium to long term.
The commitments made by a number of countries, including China, to achieve carbon neutrality by
2050 or 2060 are a strong indicator of the pace of change and the longer-term global trajectory. New
European regulation, particularly the ‘EU Taxonomy’ and the “EU Green Deal’ is likely to accelerate
the flow of capital to products and technologies needed in the low- carbon economy, and place
greater scrutiny on the carbon footprint of European industrial companies, as well as on those
importing products into the Eurozone. This is relevant for Glencore as a large producer of seaborne
thermal coal and a marketer of fossil fuels more generally.
As a result of these factors, some market participants and analysts take a bearish view (some
strongly so) on the market fundamentals for coal and oil. Some may choose not to invest in or
transact with us, due to our fossil fuels operations.
Mitigating factors - We integrate climate considerations, such as energy and climate policies in
countries where we operate and sell our products, expectations of our value chains, and the various
commitments to achieve the goals of the Paris Agreement, into our strategic decisions and day -to-
day operational management.
Our internal, cross-function and multi- commodity working group, led by our Chairman, co-ordinates
our understanding and planning for the effects of climate change on our business.
We have set ourselves a 1.5°C pathway aligned target of an absolute 40% reduction of our total
emissions (Scope 1, 2 and 3) by 2035 on 2019 levels , consistent with the midpoint of
Intergovernmental Panel on Climate Change’s 1.5°C scenarios. Post 2035, we have set ourselves the
ambition to achieve, with a supportive policy environment, net zero total emissions by 2050.
This commitment is supported by our diverse portfolio, which uniquely allows us to reduce our Scope
3 emissions through investing in our metals portfolio, reducing our coal production over time and
supporting deployment of low emission technologies.
Through our focused climate change programme, we strive to ensure emissions and climate change
issues are identified, understood and monitored in order to meet international best practice
standards, ensure regulatory compliance and meet the commitments we have made in support of the
goals of the Paris Agreement.
We continuously monitor and report our Scope 1, 2 and 3 emissions, and use this data in managing
our operational carbon footprint, as well as the development and tracking of our targets.
To understand better and plan for the effects of climate change on our business, we have a
framework for identifying, understanding, quantifying and, ultimately, managing climate-related
challenges and opportunities facing our portfolio:
Government policy: we take an active and constructive role in public policy development of
carbon and energy issues, both directly and through our industry organisations. We seek to
ensure that there is a balanced debate with regard to the ongoing use of fossil fuels
Lobbying activities: we acknowledge IIGCC Investor Expectations on Corporate Climate
Lobbying and recognise the importance of ensuring that our membership in relevant trade
associations does not undermine our support for the Paris Agreement and its Goals
Carbon pricing: we operate successfully in multiple jurisdictions that have direct and indirect
carbon pricing or regulation. We have identified some parts of our business that would likely
experience financial stress in a high carbon price environment. However, our conclusion is
that our business overall remains resilient. We consider local regulation and carbon price
sensitivities as part of our ongoing business planning for existing industrial assets, new
investments and as part of our marketing activities. We are working with relevant industry
organisations on developing lifecycle analysis to calculate our commodities’ carbon footprint
Energy costs: we consider energy costs and our carbon footprint in our annual business
planning process. Commodity departments are required to provide energy and GHG
emissions forecasts for each asset over the forward planning period and provide details of
mitigation projects that may reduce such emissions, including identifying and developing
renewable energy generation opportunities.
Physical impacts: we track changing weather conditions and amend operating processes as
appropriate, as well as incorporate climate risk into our design and planning. We regularly
review the integrity of our assets, including tailings storage facilities, against the potential
impact of extreme weather events.
Access to capital: we regularly review our banks’ climate change-related policies and evolving
applicable restrictions, if any. Through maintaining a strong relationship with our lenders, we
continue to have a broad range of sources from which to access funds.
Permitting risk: we engage with a broad range of stakeholders on diverse topics including
climate change and related areas of concern. Our engagement with our local communities
and those directly affected by our operations is transparent and honest. Where we identify
differing opinions, we look for opportunities to find constructive solutions.
Product demand: we track and respond to regulatory and technology developments. There
are near-term opportunities in positively repositioning many of our products that enable the
decarbonisation transition.
Litigation: our climate change programme strives to ensure that we identify, understand and
monitor our emissions and climate change issues in order to meet international best practice
standards, ensure regulatory compliance and meet our commitments that support the goals
of the Paris Agreement.
Further information is available at: glencore.com/sustainability/ climate-change
11. Community relations and human rights
Risk movement in 2020 – Increase
Risk appetite - Low. Our approach is to minimise the impacts of our business, engage openly and
honestly to build lasting relationships and foster socio-economic resilient communities
Description and potential impact - Respecting human rights and building strong relationships are
fundamental to the current and future viability of our business.
Due to the scale and nature of our business, we have the potential to make a significant positive
contribution to local communities, countries and broader society. Positive impacts range from the
production of the raw materials for social progress, payment of taxes and royalties to governments
and provision of employment and business opportunities. Conversely, we must also identify, mitigate
and manage any potential negative risks inherent in our operations. Areas that we carefully monitor
and manage to avoid negative impacts include health and safety of our workforce and surrounding
communities, environmental management of air, land and water and interactions with individuals and
groups who live and work in or near our local communities. Poor performance could contribute to
social instability and the perceived and real value depreciation of our assets.
We have a geographically diverse business, operating in both developed and developing countries in
an array of different contexts. In a number of regions where we operate, the socio-political
environment is complex which presents additional business, social and security risks if not well
understood and managed. While our Group policies and standards apply to all our businesses, we
tailor our community approach to be relevant and appropriate to the local context .
A perception that we are not respecting human rights or generating local sustainable benefits could
have a negative impact on our ability to operate effectively, our ability to secure access to new
resources, our capacity to attract and retain the best talent and ultimately, our financial performance.
The consequences of adverse community reactions or allegations of human rights incidents could
also have a material adverse impact on the cost, profitability, ability to finance or even the viability of
an operation and the safety and security of our workforce and assets. In addition, global connectivity
means that local issues can quickly escalate to a regional, national and global level potentially
resulting in reputational damage and social instability.
Some of our mining operations are in remote areas where they are a major employer in the region.
This presents particular social challenges when the mine’s resources are depleted to an extent that it
is no longer economic to operate and must be closed. Robust planning and stakeholder engagement
are key to mitigate environmental and social closure risks.
Developments – During 2020, Covid-19 impacted people’s quality-of-life and increased uncertainty
around the world.
The ensuing economic impacts of Covid-19 have amplified existing inequalities around the world,
resulting in an escalation of civil unrest in many countries. In the Espinar region of Peru, social
protests impacted our Antapaccay operation. The government deployed public security to return law
and order in the region around the operation without harm to community members, security forces or
our workforce.
We expect the economic impacts of the pandemic to continue for some time and our operations will
continue to respond by providing social support, in partnership with governments and development
organisations.
Artisanal and small-scale mining (ASM) continues to be a challenge at certain operations, most
notably in the DRC.
The destruction of Indigenous cultural heritage during mining activities in Australia has highlighted the
need for effective management processes and engagement, to protect areas and items of cultural
significance, and to avoid business and reputation risks.
Mitigating factors – We strive to uphold and respect the human rights of our workforce, local
communities and others who may be affected by our activities, in line with the United Nations
Guiding Principles on Business and human rights (UN GPs). We have processes to identify, prevent
and mitigate human rights risks and impacts across our business. In the event that we cause or
contribute to a negative impact on human rights, we strive to provide appropriate remedy to those
affected in line with the UN GPs.
We seek to apply the UN Voluntary Principles on Security and human rights in regions where there
is a high risk to human rights from the deployment of public and private security forces.
We respect communities’ perspectives and actively seek them to inform our decision-making. Our
ambition is to be a responsible, engaged and valued company wherever we operate and contribute to
healthy, resilient communities. We support the advancement of the interests of both our host
communities and our assets.
We seek to build enduring and trusting relationships by engaging openly and honestly and
participating as an active member of society. We focus our social investments on initiatives and
programs to deliver long-term benefits fostering socio-economic resilience.
We implement locally appropriate complaints and grievance processes and welcome feedback and
comments on our performance. We review all complaints received and take actions when necessary
to address the issues raised.
Our first and foremost priority during the Covid-19 pandemic has been the health and wellbeing of our
employees and communities, especially vulnerable groups. At the beginning of the pandemic, we
responded to the immediate medical crisis in our communities by augmenting communication
programs to promote prevention measures, providing basic sanitation and medical materials and
supporting local health systems and services. As time progresses, we will adapt our programs to
support economic recovery of our communities and regions.
During 2020, we revised our approach to ASM to explore how ASM and large-scale mining can
sustainably co-exist as distinct yet complementary sectors of a successful mining industry. We
believe that legal ASM can play an important and sustainable role in many economies when carried
out responsibly and transparently, including the DRC. One manifestation of our new approach is our
partnership with the Fair Cobalt Coalition, an NGO aiming to positively transform ASM in the DRC. It
is working towards eliminating child and forced labour, improving work practices in ASM operations
and supporting alternative livelihoods to help increase incomes and reduce poverty.
Further information is available on our website at: glenc ore.com/sustainability/ community-and-
human-rights
Related Party Transactions
The following has been extracted from page 213 of the Annual Report.
In the normal course of business, Glencore enters into various arm’s length transactions with related
parties, including fixed price commitments to sell and to purchase commodities, forward sale and
purchase contracts, agency agreements and management service agreements. Outstanding
balances at period end are unsecured and settlement occurs in cash (see notes 11, 13 and 24).
There have been no guarantees provided or received for any related party receivables or payables.
All transactions between Glencore and its subsidiaries are eliminated on consolidation along with
any unrealised profits and losses between its subsidiaries, associates and joint ventures. In 2020,
sales and purchases with associates and joint ventures amounted to $2,710 million (2019: $3,727
million) and $5,033 million (2019: $4,923 million) respectively.
Remuneration of key management personnel
Glencore’s key management personnel are the members of the Board of Directors, CEO, CFO and
the Head of the Industrial activities segment. The remuneration of Directors and other members of
key management personnel recognised in the consolidated statement of income including salaries
and other current employee benefits amounted to $19 million (2019: $18 million). There were no other
long-term benefits or share-based payments to key management personnel (2019: $Nil). Further
details on remuneration of Directors are set out in the Directors’ remuneration report on page 100.
Statement of Directors’ responsibilities
The following responsibility statement is repeated here solely for the purpose of complying with DTR
6.3.5. This statement relates to and is extracted from page 115 of the Annual Report.
The Directors are responsible for preparing the Annual Report and financial statements in accordance
with applicable law and regulations.
Company law requires the Directors to prepare financial statements for the Company for each
financial year.
The financial statements are prepared in accordance with International Financial Reporting Standards
(IFRS) adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union and
IFRS as issued by the International Accounting Standards Board. The financial statements are
required by law to be properly prepared in accordance with the Companies (Jersey) Law 1991.
International Accounting Standard 1 requires that financial statements present fairly for each financial
year the Company’s financial position, financial performance and cash flows. This requires the faithful
representation of the effects of transactions, other events and conditions in accordance with the
definitions and recognition criteria for assets, liabilities, income and expenses set out in the
International Accounting Standards Board’s Framework for the preparation and presentation of
financial statements.
In virtually all circumstances, a fair presentation will be achieved by compliance with all applicable
IFRSs.
The Directors confirm that the Annual Report and accounts taken, as a whole, is fair, balanced and
understandable, and provides the information necessary for shareholders to assess the performance,
strategy and business model of the Company However, the Directors are also required to:
Properly select and apply accounting policies
Present information, including accounting policies, in a manner that provides relevant,
reliable, comparable and understandable information
Provide additional disclosures when compliance with the specific requirements in IFRSs are
insufficient to enable users to understand the impact of particular transactions, other events
and conditions on the entity’s financial position and financial performance
Make an assessment of the Company’s ability to continue as a going concern
The Directors are responsible for keeping proper accounting records that disclose with reasonable
accuracy at any time the financial position of the Company and enable them to ensure that the
financial statements comply with the Companies (Jersey) Law 1991. They are also responsible for
safeguarding the assets of the Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities. The Directors are responsible for the maintenance and
integrity of the corporate and financial information included on the Company’s website. The legislation
governing the preparation and dissemination of the Company’s financial statements may differ from
legislation in other jurisdictions.
Important notice concerning this document including forward looking statements
This document contains statements that are, or may be deemed to be, “forward look ing statements” which
are prospective in nature. These forward look ing statements may be identified by the use of forward
look ing terminology, or the negative thereof such as “outlook ”, “plans”, “expects” or “does not expect”, “is
expected”, “continues”, “assumes”, “is subject to”, “budget”, “scheduled”, “estimates”, “aims”, “forecasts”,
“risk s”, “intends”, “positioned”, “predicts”, “anticipates” or “does not anticipate”, or “b elieves”, or variations
of such words or comparable terminology and phrases or statements that certain actions, events or results
“may”, “could”, “should”, “shall”, “would”, “might” or “will” be tak en, occur or be achieved. Forward-look ing
statements are not based on historical facts, but rather on current predictions, expectations, beliefs,
opinions, plans, objectives, goals, intentions and projections about future events, results of operations,
prospects, financial condition and discussions of strategy.
By their nature, forward-look ing statements involve k nown and unk nown risk s and uncertainties, many of
which are beyond Glencore’s control. Forward look ing statements are not guarantees of future performance
and may and often do differ materially from actual results. Important factors that could cause these
uncertainties include, but are not limited to, those disclosed in the Risk Management section of this report.
For example, our future revenues from our assets, projects or mines will be based, in part, on the mark et
price of the commodity products produced, which may vary significantly from current levels. These may
materially affect the timing and feasibility of particular developments. Other factors include (without
limitation) the ability to produce and transport products profitably, demand for our products, changes to the
assumptions regarding the recoverable value of our tangible and intangible assets, the effect of foreign
currency exchange rates on mark et prices and operating costs, and actions by governmental authorities,
such as changes in taxation or regulation, and political uncertainty.
Neither Glencore nor any of its associates or directors, officers or advisers, provides any representation,
assurance or guarantee that the occurrence of the events expressed or implied in any forward- look ing
statements in this document will actually occur. You are cautioned not to place undue reliance on these
forward-look ing statements which only speak as of the date of this document.
Except as required by applicable regulations or by law, Glencore is not under any obligation and Glencore
and its affiliates expressly disclaim any intention, obligation or undertak ing, to update or revise any forward
look ing statements, whether as a result of new information, future events or otherwise. This document shall
not, under any circumstances, create any implication that there has been no change in the business or
affairs of Glencore since the date of this document or that the information contained herein is correct as at
any time subsequent to its date.
No statement in this document is intended as a profit forecast or a profit estimate and past performance
cannot be relied on as a guide to future performance. This document does not constitute or form part of
any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for any
securities.
The companies in which Glencore plc directly and indirectly has an interest are separate and distinct legal
entities. In this document, “Glencore”, “Glencore group” and “Group” are used for convenience only where
references are made to Glencore plc and its subsidiaries in general. These collective expressions are used
for ease of reference only and do not imply any other relationship between the companies. Lik ewise, the
words “we”, “us” and “our” are also used to refer collectively to members of the Group or to those who work
for them. These expressions are also used where no useful purpose is served by identifying the particular
company or companies.
Sponsor
Absa Bank Limited (acting through its Corporate and Investment Banking Division)
Date: 11-03-2021 01:55:00
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