Ivan Glasenberg. Picture: REUTERS
Ivan Glasenberg. Picture: REUTERS

To thine own self be true. The outlook for Glencore, the world’s largest trading and mining group, depends on how CE Ivan Glasenberg interprets that maxim. His feat in turning a secretive partnership into a London-listed multinational deserves credit. His follow-up must be to distance Glencore from questionable dealings in hot countries of the kind that have triggered a probe by the US Department of Justice (DoJ). His ruthless scrutiny of the business in the cause of shareholder value may eventually extend to his position at the top of it.

Do not be deceived by brokerage reports downplaying the investigation. Glencore’s core competence has always been to operate in dirty markets and come away clean-handed. It may be losing its touch: on Tuesday the group received a subpoena for documents from the DoJ.

The request, under the Foreign Corrupt Practices Act and US money laundering statutes, relates to businesses in Nigeria, the Democratic Republic of Congo (DRC) and Venezuela. The probe deepens doubts prompted by Glencore’s dealings with Dan Gertler. The Israeli businessman has been placed under sanctions by the US Treasury for his “opaque and corrupt” dealings in the DRC. Worse, this subpoena appears to focus on Glencore’s global trading, not on its mining.

All this suggests that Glencore’s valuation will trail its main rivals. A year ago it posted a roughly 10% premium to peers on a multiple of enterprise value to earnings before interest, taxes, depreciation and amortisation. At five times and falling, that has reversed to a discount in 2018. A growing trend towards ethical investment will make it harder to regain a premium. Responsibly managed portfolios already account for more than a quarter, $23-trillion, of all professionally managed assets globally.

Glencore’s shares look cheap and will get cheaper. Glasenberg contemplated taking a back-seat role at the time of the Xstrata takeover. If the DoJ probe goes badly, he may have to consider it again. London, July 4