ESG Investors Score Another Win at Rio, This Time on Climate

(Bloomberg) -- Rio Tinto Group will support two climate proposals at its next shareholder meeting, the latest win for ESG-focused investors after the miner’s destruction of Aboriginal heritage sites last year shined a spotlight on its governance.

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 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.

The other resolution asked that Rio enhance its annual review of industry association memberships to ensure they’re consistent with the Paris Agreement.

“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 favor of these resolutions,” the company said Friday in a statement.

Miners have been rolling out climate pledges as they face increased scrutiny over their environmental, as well as social and corporate, governance. Just last month, Rio 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. It’s also sought to repair its reputation after blasts by the company caused irreparable damage to ancient rock shelters in Australia, leading to the ousting of the chief executive officer.

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.

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

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 degrees Celsius. But Market Forces 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 Ltd., 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 was the biggest challenge for Rio, Vincent said, given that they account for the bulk of its carbon footprint. Rio said last month 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 aluminum and net-zero emissions from shipping by 2050 and, like BHP, will tie executive bonuses to progress.

The company’s AGM will be held in London on April 9.

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