6 May 2021
99% of Rio Tinto’s investors today voted in favour of a Market Forces-coordinated resolution calling for Paris-aligned emission reduction targets, on the back of a supporting statement which tears the company’s current targets to shreds.
The vote came after Rio waved the white flag in the arguments over its emission reduction targets, rather than face frustrated investors, whose support for improved climate targets increased from 6% in 2019 to 37% in 2020.
The near unanimous vote is a win for its shareholders, but the real work starts here.
While Rio has staved off a shareholder revolt this year, it is vital that investors ensure their frustration is heard by the company over the next year. With Rio committing to an advisory vote on its climate change report next year, there is no excuse for any investor to shirk its responsibility to demand much more ambition, and vote against the company next year if its targets still aren’t up to scratch.
The results are in: 99% of @RioTinto shareholders today voted for a resolution calling on the company to set independently verified, Paris-aligned emission reduction targets pic.twitter.com/mdjgZX2XBb— Market Forces (@market_forces) May 6, 2021
No independent verification of targets
Despite the board’s recommendation in favour of the emission targets resolution, Chairman Simon Thompson admitted the company had no intention of meeting a key element of resolution: a request that all targets be independently verified as aligned with the Paris climate goals.
If Rio Tinto truly believes its current emissions targets are Paris-aligned, why won’t the company get independent verification of that claim?
Clearly, no responsible third party would risk its reputation by endorsing Rio’s inadequate goals. Investors must share this mindset.
If @RioTinto truly believes its current greenhouse gas emissions targets are aligned with the Paris #climate goals, why won’t the company get independent verification of that claim? pic.twitter.com/rTQgBL5wnw— Market Forces (@market_forces) May 6, 2021
Shifting goalposts and accounting tricks
Rio Tinto’s current inadequate emission reduction targets rely heavily on business as usual outcomes and sleight of hand techniques. Rio Tinto long ago sold its coal assets as they were no longer providing financial value to the company. Now Rio is trying to capitalise on this once again, shifting the goalposts on its emissions baseline back to a time when the company’s portfolio was very different to today.
The deliberate attempt to downplay the level of emission reduction ambition required from today was evident in Mr Thompson’s response to shareholder questioning at today’s AGM.
More ambition required
The lack of ambition in Rio’s current emission reduction targets was a recurring theme at today’s AGM. Most of the emission reductions Rio plans to achieve in the coming decade are the result of measures such as using increased renewable energy and energy efficiency in its operations, which makes sense from a purely financial perspective and is becoming increasingly commonplace among heavy industries.
The supporting statement for the resolution notes Rio’s current emissions targets are “inadequate,” and that “further investor support is required to ensure the company acts to align its operations with, and appropriately manage the risks posed by the low-carbon transition required to meet the climate goals of the Paris Agreement.”
Mr Thompson refused to accept that the board’s endorsement of the shareholder resolution means Rio recognises its current approach to reducing emissions lacks the ambition required to meet investors expectations, although his comments in response to shareholder questioning on this point suggested the company is feeling pressure to increase its ambition.
Investors must demand Rio Tinto step up and produce new targets that reflect the scale of emissions reduction required from today to meet the Paris climate goals.
Scope 3 emissions risk
A further resolution calling for Rio Tinto to manage the gargantuan climate risk embedded in its “Scope 3” emissions has been lodged for next year’s annual general meeting. Market Forces fully expects Rio Tinto to finally do what its competitors have started doing and declare how much it expects these emissions to fall in future.
In response to shareholder questioning on this issue, Mr Thompson’ failed to recognise Rio Tinto’s massive scope 3 emissions profile as a material risk to the company, nor commit the company to including a statement quantifying the amount of exposure to this risk Rio is willing to tolerate in the future.