7 May 2020
37% of Rio Tinto’s shareholders today voted in favour of a shareholder proposal calling on the mining giant to set Paris-aligned targets to reduce its greenhouse gas emissions, including those generated by the use of its products.
Given Rio Tinto’s board opposed the proposal, the vote represents a significant investor revolt against the company’s lacklustre approach to emissions reduction, which falls well short of the action required to meet the Paris climate goals.
With support jumping from just 6% of investors backing a similar resolution at last year’s AGM, it’s clear many investors are quickly coming to grips with the need to ensure the companies they own are adequately managing climate risk, and bringing their operations into line with a stable climate future.
Speaking on behalf of the shareholders who put forward the resolution, Market Forces Executive Director Julien Vincent told today’s meeting:
An incredible result at yesterday’s @RioTinto AGM, where *37%* of investors voted against the board to demand Paris-aligned scope 1, 2, and 3 emission reduction targets. Congratulations to all the shareholders involved. Read all about yesterday’s action: https://t.co/oeuDCuooKM pic.twitter.com/0vGgAC832o— Market Forces (@market_forces) May 7, 2020
“We must confront the fact that achieving the Paris climate goals means emissions need to fall drastically across all sectors, including industries such as steelmaking… This means a large degree of our business, and customer base, is structurally challenged unless it works to decarbonise its operations.”
“To be afforded such a rare opportunity to foresee and mitigate such a substantial threat to this company’s prospects and not act is a failure of leadership that exposes the capital invested in this company to needless risk.”Julien Vincent, Market Forces Executive Director
Emissions commitments fall short of Paris goals
Set earlier this year, Rio Tinto’s current target to reduce its absolute operational emissions by just 15% by 2030 is inconsistent with the Paris climate goals.
The IPCC has found that in order to meet the Paris Agreement’s goal of limiting global warming to 1.5°C, emissions would need to fall by about 45% from 2010 to 2030. The Science-based Targets initiative suggests Rio Tinto’s absolute emissions would have to fall by 50% by 2030 to be in line with a 1.5°C pathway, or 30% to be in line with ‘well-below 2°C’ of warming.
Given the apparent gulf between Rio’s commitments and Paris-aligned emission reduction pathways, shareholders today asked if the company could provide any material to support the claim that its strategy is consistent with Paris.
Chair Simon Thompson did not direct shareholders to any such material. He did, however, instead went to great lengths to try to discredit analysis demonstrating the misalignment of Rio’s targets with the Paris Agreement.
Major climate risk exposure
Emissions generated by customers processing Rio’s products – primarily in steelmaking – make up 94% of the company’s total emissions footprint. These emissions leave Rio Tinto’s customer base – and therefore revenue stream – exposed to regulatory and market shifts required to bring decarbonise in order to meet the Paris climate goals.
Yet the company hasn’t set any targets to manage this huge exposure to transitional climate risk. This is in clear contravention of investor expectations, set out through both the Task Force on Climate-related Financial Disclosures (TCFD), which recommends setting targets to manage climate risk exposures, and the Climate Action 100+, which calls on companies to reduce greenhouse gas emissions across their value chain, consistent with the Paris Agreement’s goals.
When questioned on this issue at today’s online AGM, Rio failed to explain if, how and when the company intends to meet the Climate Action 100’s central demand that companies “take action to reduce greenhouse gas emissions across their value chain, consistent with the Paris Agreement’s goal.”
Climate hypocrisy called out
Rio Tinto has committed to spend US$1 billion on emissions reduction projects in the next five years.
But the company plans to spend almost the same amount (US$924 million) to build a new coal fired power station to power its Oyu Tolgoi mine in Mongolia.
The board was challenged over these plans at today’s meeting, failing to convince shareholders that they weren’t being grossly hypocritical when it comes to climate action.
While we wait for results on the shareholder resolution calling on @RioTinto to set Paris-aligned emission targets, here’s a clip from today’s AGM querying the hypocrisy of spending $1 bn on climate projects, and another $1 bn building a brand new coal power plant @mrjoeaston pic.twitter.com/kyzKkVugd6— Market Forces (@market_forces) May 7, 2020