Rio Tinto investors have voted against the company’s financial statements over a lack of clarity about climate change risks at the mining giant’s London annual general meeting.
Ahead of the vote, investment management firm Sarasin & Partners declared its intention to vote against the company’s financial statements, against keeping accounting firm KPMG on as auditor and questioned the performance of the company’s audit committee.
A note from the firm’s head of stewardship, Natasha Landell-Mills, said Rio Tinto had not disclosed key material about how it would transition to a zero carbon economy.
“While Rio has increased its discussion of climate risks and made clear that its accounts are not 1.5C aligned, thereby providing welcome transparency, it does not provide disclosures on its quantitative assumptions, or visibility as to how it would be impacted if its own stated goal to be 1.5C-aligned were achieved,” Landell-Mills said.
The note did not say the firm was voting against the company’s climate statement.
Auditors are essential to making investment decisions and any failure to identify, discuss and disclose whether a company is able to meet its climate commitments, and the risk of stranded assets, means investors will be left on the hook.
Rio Tinto’s largest source of carbon emissions are scope 3 emissions – the emissions created by assets not owned or controlled by the reporting organisations.
As the smelters responsible for turning its iron ore into steel operate in China, Japan and South Korea, and are not owned by the company, the mining giant has so far resisted placing a target on scope 3 emissions.
But investors have been increasingly putting pressure on the company to act.
An assessment by the Australasian Centre for Corporate Responsibility (ACCR) of Rio Tinto’s climate statement found that despite progress elsewhere, the company was not doing enough these emissions.
It also found Rio Tinto maintained memberships in industry associations that lobbied against climate action.
Dan Gocher, ACCR director of climate and environment, said that as the company does not disclose the voting numbers from its London and Australian AGMs, it was difficult to tell the exact level of opposition.
“There’s likely to have been some investor opposition to Rio Tinto’s climate report overnight primarily because Rio has not set targets for scope 3 emissions, which it has resisted for many years,” Gocher said.
“It did, however, make very significant commitments at the end of 2021 to reduce its operational emissions and allocated significant capital expenditure to achieve that.”
Glenn Walker, a senior campaigner with Greenpeace Australia, said it was “absolutely wild” that how investors voted was not publicly disclosed.
“Transparency is critical,” Walker said. “There should be an open record on who votes on what at AGM and shareholder meetings so we can hold investors to account for their climate commitments.”
Walker said this year would mark a test for investors and auditing firms about how genuine they are in their commitment to assessing climate risk and acting to mitigate it.
Following investor discontent in the UK, he said Rio Tinto was on notice ahead of its general meeting in a month – along with the rest of corporate Australia.
He said that a vote scheduled in two months by AGL seeking permission from its shareholders to split its coal assets into a separate company was a critical moment for firms that have signed up to the Net Zero Asset Managers initiative.
“We’ve seen a lot of nice statements, but this is where the rubber hits the road,” Walker said. “It’s a real big test for these investors and their auditors over their climate commitments.
“Our view is they shouldn’t let the demerger proceed because they want to keep burning coal to 2045.”
Rio Tinto was contacted for comment.