Investors greenlight Whitehaven’s staggering pipeline of coal expansion plans

Whitehaven Coal faced intense questioning from shareholders and continued investor discontent from several major investors at its annual general meeting (AGM) held in Sydney on Wednesday.

The company’s remuneration plan received a 13% vote against it, signalling discontent from shareholders. The company Chair Mark Vaile also copped a significant protest vote, with a 19% shareholder vote against his reelection and a 41% vote against a bonus for Chief Executive Officer (CEO) Paul Flynn.

A Halloween-themed action out the front of the AGM confronted company leadership and shareholders, highlighting that Whitehaven’s coal expansion plans are truly frightening in the context of the climate crisis.

Shareholders have been demanding better from Whitehaven for years now, having supported previous Market Forces-coordinated shareholder resolutions and voting against the Board’s recommendations on several occasions, but the company continues to ignore its shareholders and climate science by refusing to rein in its destructive coal expansion plans.

Executive remuneration is a climate problem

Whitehaven Coal is one of the largest undiversified coal companies listed on the Australian Securities Exchange (ASX). It continues to defy shareholder concerns about company strategy and executive remuneration as the world transitions to a decarbonised economy. Over the years, major shareholders have responded to this arrogance by deserting the company, with two thirds of the top 30 super funds by combined assets under management (AUM) having restricted investments in Whitehaven.

Rather than heed the genuine concerns from its shareholders, Whitehaven now tops the list of coal companies operating in Australia with both the largest portfolio of expansionary projects and a remuneration plan that heavily ties executive pay to their delivery. 

If all of Whitehaven’s coal expansion projects proceed as planned, over their lifetimes they would unleash around 3.6 billion tonnes of carbon emissions. This is 23 times the cumulative emissions reductions expected to be made under the Australian government’s Safeguard Mechanism by 2030.

It is not only possible that these new coal mines and extensions will proceed, but quite probable considering the company is also an outlier in how much its executives’ pay and bonuses are tied to the delivery of these long-term coal projects. 

Companies put forward an executive remuneration plan at their AGM every year, specifying the criteria that will determine the CEO’s pay, and whether they will receive a bonus. Remuneration plans across the industry generally include things like safety, environmental compliance, and total shareholder returns. While production growth incentives are relatively common across the broader mining industry, Whitehaven’s emphasis on them makes the company a clear outlier, even when compared with other coal miners. Boards, shareholders and proxy advisors alike will need to determine how to reconcile this incongruous focus on coal growth with the changing outlook for coal, and particularly for undiversified companies like Whitehaven.

Incentivising company executives to pursue new long-life coal projects could present serious risks to medium- and long-term shareholder value, given the rapid technological changes happening in both the global energy and steel industries. Modelling published by Market Forces earlier this year demonstrated that the company’s growth strategy is extremely susceptible to highly-probable risks, including:

• a decrease in the coal price due to falling demand 
• higher ongoing costs from new industrial relations laws, inflation, the Safeguard Mechanism, and increased costs of capital

Whitehaven’s cavalier attitude towards the increased costs it is likely to face in the coming years was on display at the company’s AGM this year. In response to a question on offsets and the risk relying on them could pose to the company in the future, Whitehaven’s Chair shrugged off the concern:

Whitehaven seems particularly oblivious to the existential risks it faces, and deaf to the demands of its shareholders. After receiving a first strike against its remuneration plan in 2023, the company made almost no changes to its executive scorecard in 2024, clearly disregarding shareholder concerns. 

Market Forces worked with more than 100 Whitehaven shareholders to file a shareholder statement on the company’s remuneration report, calling for the removal of its coal growth incentives. While the statement did not propose an alternative metric, one possible solution is a metric called total shareholder returns (TSR), which would orient company executives away from spending shareholder capital on coal growth projects if these projects risk shareholder returns. When asked by a proxy holder about why the company continues to ignore this feedback, the Chair’s  response was to suggest that the remuneration plan was already aligned to its strategy:

But a coal production growth strategy no longer makes sense if it could ultimately destroy shareholder value as the energy transition accelerates. With the company sitting on so many growth projects, Whitehaven’s remuneration structure could not only be damaging to shareholder value, but also to our precious climate.

Shareholders failing to exercise their power

In theory, a company like Whitehaven could be brought into line by the shareholders that own it, many of which have made climate commitments and are required to act in their clients’ best financial interests.

One of the several possible tools shareholders could use to pressure Whitehaven to change is a shareholder resolution, a means of sending a strong message to companies who care to listen. While these non-binding proposals can be a powerful tool for change, companies like Whitehaven Coal have repeatedly demonstrated a failure to listen to shareholders when they voice opposition to the company’s coal expansion plans through this mechanism. 

Given this ongoing failure to heed genuine calls for change, this year we asked investors and proxy advisors to increase pressure on Whitehaven by casting a vote against the company’s remuneration plan and binding votes against the two directors up for reelection, in their capacity as members of the remuneration committee.

The remuneration plan received a 13% vote against it, signalling major discontent from shareholders including super funds Vision Super and ESSSuper. The company’s Chair also copped a significant protest vote of 19% against his reelection, with Vision Super and CBUS among the shareholders that voted this way, and a 41% vote against a bonus for the CEO Paul Flynn. 

Some super funds and other investors have already published their voting decisions and the rationale behind them, while others won’t disclose these for months. While we wait for more voting disclosures to be published, our conversations throughout the year with shareholders and proxy advisors have already provided some insights into their views on the company and its aggressive coal growth strategy.

One of the consistent things we heard from investors was they felt they had already done as much as they could at Whitehaven, such as reducing exposure significantly and taking actions according to their stewardship policies to increase pressure (e.g. voting for climate-related shareholder resolutions or against director reelections). This is patently false. If these investors were serious about managing the severe risks posed by Whitehaven’s dangerous coal expansion strategy, much stronger steps can be taken, including publicly exiting the company altogether. 

Another explanation we heard from investors with emissions reduction commitments was that Whitehaven is not a significant contributor to portfolio emissions. This is true when compared with a company like BHP, as Whitehaven represents a much smaller proportion of the Australian share market than BHP and therefore a smaller proportion of many investors’ portfolios. Through this lens, it is understandable that a company like BHP may be prioritised over Whitehaven for investor engagement. However, Whitehaven poses a bigger threat in terms of future emissions attributable to fossil fuel expansion because the company is ultimately sitting on a larger pile of coal expansion plans than even BHP. Previous Market Forces analysis has found, for example, that Whitehaven is responsible for a significant proportion of projected emissions from the fossil fuel expansion plans of companies in most super funds’ portfolios, due to the scale of its aggressive coal growth plans. Clearly this should make the company a priority for urgent and forceful investor engagement.

Another group of investors claimed their general approach towards stewardship meant they preferred to play a more hands-off role and trusted Whitehaven’s board to set the strategic direction of and remuneration arrangements at the company. This is a baffling attitude for any investor to have considering that five out of eight Whitehaven board members have fossil fuel backgrounds, and it is unclear which directors have experience managing climate risk as the company does not disclose how its board is assessed against the requirements of its skills matrix. 

Additionally, Mark Vaile has been Chair of Whitehaven’s board since 2012 which means standing for another term will take him past the nine to twelve year mark recommended as best practice by the Australian Institute of Company Directors. The protest vote against his reelection is the second highest vote against the Chair of a company in the ASX 100 since November 2017. With Vaile now heading towards 15 year as Chair, he would not confirm whether this would be his final term when asked during the meeting:

We have already seen some investors start to link director votes with climate, and for good reason. A company’s board of directors is responsible for setting the company’s strategic direction, and if those directors are not up to the task of steering the company towards a decarbonised future, they should be held accountable.

A vote against the reelection of directors who fail to demonstrate an understanding of climate and transition risk sends a clear message that leadership is expected to drive change. We must see more shareholders willing to remove directors stewarding climate disaster. 

Investors can also exert their influence on investee companies by ensuring executives are rewarded for goals aligned with positive long-term environmental and climate outcomes, rather than solely short-term growth or profits. Linking compensation to sustainability and climate metrics motivates executives to take a longer-term view when committing to new projects that could expose shareholders to increased transition risk, yet so far we have seen investors struggle to make the link between remuneration and climate.

To spell it out for those investors: the strategic direction of an undiversified fossil fuel company, driven by executive priorities and pay, is a climate issue. 

The global energy transition is accelerating, and investors must adapt their practices by rapidly bringing these laggard companies into line or withdrawing capital.

Frontline community groups not backing down 

Even though major investors have abdicated their responsibility to rein in this company’s climate-wrecking business plans, frontline community members with front row seats to Whitehaven’s impacts attended the meeting to hold the company accountable.

Sally Hunter, a farmer and business woman based in Boggabri and neighbour to Whitehaven’s operations, called out the company for continuing to break environmental laws:

The company remains in court for several issues, including releasing noxious fumes during blasting operations that have impacted nearby landholders.

Karra Kinchella, Gomeroi woman living on country impacted by Whitehaven’s mining operations, asked a question about the just transition for her community and Gomeroi people living in the North-West:

Unsurprisingly, company leadership refused to commit to a just transition and support for workers in Gunnedah and Narrabri, only promising jobs well into the future (which they of course cannot guarantee as the energy transition continues). On top of that, CEO Paul Flynn suggested that while Whitehaven is currently legally required to rehabilitate the land impacted by its mining operations, that may change because of “community sentiment changing” about the use of the land after mining, a talking point currently being pushed by the coal industry and not something that is representative of actual community sentiment. 

Grassroots groups held a Halloween-themed protest out the front of the AGM venue to confront company leadership and shareholders over Whitehaven’s impacts on Koala habitat, highlighting the company’s truly terrifying coal expansion plans. 

Where to from here

November next year will mark the 10-year anniversary of the drafting of the 2015 Paris Agreement. 2015 was also the year Whitehaven’s Maules Creek mine began production, tearing into one of the last intact patches of the nationally-listed and critically endangered Box-Gum Woodland forests. Since then, the company has only added to its portfolio of coal expansion projects, flouting the scientific consensus that coal use must begin declining steeply to meet global climate goals. 

After a significant vote against the board’s recommendations this year, Whitehaven was in the news the day after its AGM as a bidder for a major Queensland coal mine. This is yet another blatant example of the company ignoring shareholders demanding the company return capital rather than spend it on more coal mines. 

With the decarbonisation of our global economy well and truly underway, fossil fuel companies, as the biggest contributors to greenhouse gas emissions, will either go the way of the Eastman Kodak Company or Orsted, and shareholders have a major role in pushing these companies down the right path.

Ultimately, shareholders may find that engagement with these companies can only go so far, meaning that any stewardship efforts must be backed by the credible threat of divestment.

Any investor with climate or active ownership commitments must pull out all the stops to end the coal expansion plans of companies like Whitehaven Coal, demonstrating they are willing to rapidly escalate pressure on and publicly divest from these particularly wayward companies or face possible regulatory consequences for greenwashing. 

If shareholders fail to hold Whitahaven to account, they won’t just be handing a book of matches to this arrogant coal company to burn our climate, but a molotov cocktail. 

Cover image: Maules Creek coal mine, Copyright: Northwest Protection Advocacy, 18 December 2021