Rio Tinto to support climate-related resolutions due to activist pressure

Sydney — Rio Tinto Group will support two climate-related resolutions being brought by activist investors at next month’s AGM, as the miner grapples with growing pressure from shareholders to boost its environmental credentials.

The world’s top iron ore producer will back a motion from Market Forces requesting it to disclose short-, medium- and long-term targets for greenhouse gas (GHG) emissions from its own operations, as well as its performance against those targets. A similar motion last year was not endorsed by Rio, but still garnered the support of 37% of shareholder votes at the AGM.

“As Rio Tinto’s current approach is substantially consistent with both of the proposed resolutions, the Rio Tinto board is recommending that shareholders vote in favour of these resolutions,” the company said in a statement on Friday.

The move comes a month after the miner made a major U-turn in its stance on customer, or scope 3, emissions, reversing an earlier position that it had no control over how steelmakers used the iron ore it mines.

Rio has been working to repair its broader reputation on environmental, social and governance (ESG) issues in the wake of last year’s Juukan Gorge incident, when blasts by the company caused irreparable damage to ancient rock shelters.

The shareholder recommendation “is important recognition from Rio Tinto that its climate ambition has been inadequate so far”, Julien Vincent, Market Forces’ executive director, said in a statement.

The second resolution, from the Australasian Centre for Corporate Responsibility, calls on Rio to review its membership of industry associations for any inconsistency with Paris Agreement goals.

Rio said it had already set out short-, medium- and long-term targets for its scope 1 and 2 GHG emissions in its 2020 annual report and climate-change report, and would continue to disclose them in the decade ahead.

“We’re looking forward to the company improving its scope 1 and 2 emission reduction targets over the next year to actually match the trajectory required to meet the Paris climate goals and are glad to have the company on board with that mission,” Market Forces’ Vincent said.

Falling short

Rio has said that its current targets — which include a 15% reduction in operational emissions by 2030 from a 2018 baseline — align with pathways to limit global warming to 1.5°C. But Market Forces, in a statement in support of its resolution, said Rio’s targets “fall well short of what can be considered consistent with the Paris Agreement”, adding that alignment would require a 50% reduction in emissions over the same timeframe.

Rival BHP Group, like Rio, is also targeting net-zero by 2050, while Fortescue Metals Group, the world’s number four iron ore shipper, earlier this week, put down a marker with a target to be carbon neutral from its operations by 2030.

Tackling scope 3 emissions is the biggest challenge for Rio, Vincent said, given that they account for the bulk of its carbon footprint. Rio said in February it would work with its customers to reduce steel-making carbon intensity by at least 30% by 2030 and aim for carbon-neutral steel production also by 2050.

It’s also targeting zero-carbon aluminium and net-zero emissions from shipping by 2050 and, like BHP, will tie executive bonuses to progress.

“Rio’s next climate risk report needs to clarify its risk appetite to this massive carbon liability, and tell shareholders how much it is prepared to be exposed to scope 3 emissions in future,” Vincent said.

Rio also committed to putting its 2021 climate-change report to an advisory vote at next year’s AGM. “This ‘say on climate’ will provide shareholders with the opportunity to express their view on our climate-change strategy and implementation, taken as a whole.” The company’s AGM will be held in London on April 9

Bloomberg